Tribunal rules income as business, not capital gain, due to tax threshold.

The tribunal dismissed the appeal filed by the department, determining that the income should be treated as business income instead of short term capital gain. The decision was based on the tax effect falling below the threshold set by CBDT Circular No.21 of 2015, which specified a limit of Rs. 10,00,000 for filing appeals. The tribunal emphasized the importance of considering tax effect in determining the viability of appeals, in line with legislative provisions and circular instructions.

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Issues:
1. Determination of income as short term capital gain or business income.
2. Applicability of tax effect in filing the appeal.

Analysis:

*Issue 1: Determination of income as short term capital gain or business income*

The appeal revolved around whether the income of a certain amount should be treated as short term capital gain under section 111A or as income from business. The appellant argued that the income should be considered as business income due to frequent trading of shares and lack of separate books of accounts. However, during the hearing, it was highlighted that the tax effect in this case was less than Rs. 10,00,000, making the appeal questionable. The calculations presented during the hearing showed that the tax effect fell below the threshold.

In response, the department argued that considering surcharge and cess as part of tax would push the tax effect over Rs. 10,00,000. The appellant, citing a decision by ITAT Mumbai Benches, contended that surcharge and education cess should not be included in tax for determining the tax effect. The tribunal, in alignment with the Mumbai Bench decision, concluded that surcharge and cess should not be considered part of tax for this purpose, thereby dismissing the appeal by the department.

*Issue 2: Applicability of tax effect in filing the appeal*

The CBDT Circular No.21 of 2015 set a monetary limit of Rs. 10,00,000 for not filing appeals before the Tribunal. The circular specified that appeals should not be filed based solely on exceeding the tax limits, but on the merits of the case. It was noted that Section 268A of the Income Tax Act empowered the Board to issue instructions on monetary limits for filing appeals. Considering the circular and legislative provisions, the tribunal found that the Revenue should not have filed the appeal due to the tax effect falling below the specified limit.

In conclusion, the tribunal dismissed the appeal filed by the department based on the CBDT circular and the provisions of the Income Tax Act, without delving into the merits of the case. The decision was made in adherence to the monetary limit set by the circular, emphasizing the importance of considering tax effect in determining the viability of filing appeals.

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