Tribunal confirms tax treatment, allows STT credit, and deletes penalties for assessment years.

The Tribunal upheld the AO's decision to tax the short-term capital gain as business income. It directed the AO to allow credit for Securities Transaction Tax (STT) paid under Section 88E. The Tribunal also upheld the CIT(A)'s deletion of penalties under Section 271(1)(c) for the assessment years 2006-07 and 2007-08, finding no concealment of income or furnishing of inaccurate particulars by the assessee.

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Issues Involved:
1. Taxation of short-term capital gain under the head 'income from business and profession'.
2. Credit of Securities Transaction Tax (STT) under Section 88E of the Income Tax Act.
3. Deletion of penalty under Section 271(1)(c) of the Income Tax Act for the assessment years 2006-07 and 2007-08.

Detailed Analysis:

1. Taxation of Short-Term Capital Gain:
The primary issue was whether the income from the sale of shares, declared as short-term capital gain by the assessee, should be taxed under 'profit and gains of business and profession'. The assessee argued that the company was initially intended for manufacturing and trading in power control equipment but later resolved to invest in the capital market. The assessee maintained separate records for trading and investment activities, using self-generated funds without borrowing. The AO, however, treated the entire activity as business income, citing the volume, frequency, and consistency of transactions, and the lack of separate demat accounts for trading and investment. The Tribunal upheld the AO's decision, emphasizing the holistic consideration of factors like the nature of transactions, the intention behind them, and the maintenance of records.

2. Credit of Securities Transaction Tax (STT):
The assessee contended that if the short-term capital gain is taxed under 'profit and gains of business and profession', then credit for STT paid should be allowed under Section 88E. The Tribunal agreed with this contention and directed the AO to allow the credit for STT after verifying the payment.

3. Deletion of Penalty under Section 271(1)(c):
The appeals also involved the deletion of penalties imposed under Section 271(1)(c) for the assessment years 2006-07 and 2007-08. The AO had levied penalties for concealing income or furnishing inaccurate particulars. The CIT(A) deleted the penalties, noting that the assessee had disclosed all relevant details and the issue was merely a change of opinion by the AO. The Tribunal upheld the CIT(A)'s decision, referencing the Supreme Court's ruling in Reliance Petroproducts, which stated that making an incorrect claim in law does not amount to furnishing inaccurate particulars.

Conclusion:
- The Tribunal upheld the AO's decision to tax the short-term capital gain as business income.
- The Tribunal directed the AO to allow credit for STT paid under Section 88E.
- The Tribunal upheld the CIT(A)'s deletion of penalties under Section 271(1)(c) for both assessment years, agreeing that there was no concealment of income or furnishing of inaccurate particulars by the assessee.

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