Tribunal classifies share sale income as Short Term Capital Gains, emphasizing consistency.

The Tribunal reversed the decision of the lower authorities and allowed the assessee's appeal, classifying the income from the sale of shares as "Short Term Capital Gains." The Tribunal emphasized the principle of consistency and upheld the assessee's claim, noting that the magnitude of transactions does not change their nature. The decision was pronounced in open court on 12/08/2016.

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Issues Involved:
1. Whether the income from the sale of shares should be treated as "Short Term Capital Gains" (STCG) or "Business Income".

Detailed Analysis:

Background:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-VI, Kolkata, dated 30.03.2013. The assessment was framed by the Deputy Commissioner of Income Tax (DCIT), Circle-5, Kolkata under section 143(3) of the Income Tax Act, 1961 for the assessment year 2008-09. The primary issue in this appeal was whether the sum of Rs. 88,05,787 should be assessed as "Profits and Gains of Business or Profession" or "Short Term Capital Gains".

Facts of the Case:
The assessee, a Private Limited Company engaged in investment and finance, declared its income from STCG at Rs. 88,05,787 and Long Term Capital Gains (LTCG) of Rs. 8,45,589 for the year under consideration. The Assessing Officer (AO) observed that the assessee had engaged in frequent transactions of purchase and sale of shares, involving more than 251 scripts with a purchase value of Rs. 6.85 crores and sale consideration of Rs. 5.89 crores. The AO treated the income declared as STCG as "business income" on the grounds of systematic and frequent transactions.

CIT(A) Decision:
The CIT(A) upheld the AO's decision, noting that the frequency and nature of transactions indicated a business activity rather than investment. The CIT(A) emphasized that the character of transactions depends on the facts and circumstances of each case and that the intention at the time of purchase was to make quick profits rather than to invest. The CIT(A) also noted that the AO had accepted the closing balance as investments for short-term capital gain in earlier years under section 143(1), but this was the first year of scrutiny.

Tribunal's Analysis:
The Tribunal considered the rival contentions and relevant material on record. It was noted that various courts have held differing views on whether such transactions should be treated as business income or capital gains. The Tribunal referred to CBDT Notification No.6/2016 dated 29.02.2016, which aimed to reduce litigation and uncertainty. The notification stated that if the assessee treats transactions as stock-in-trade, the department shall not dispute it. The Tribunal also relied on the judgment of the Hon'ble Bombay High Court in the case of Commissioner of Income Tax vs. Gopal Purohit, which held that it is open to an assessee to maintain separate portfolios for investment and business activities.

Conclusion:
The Tribunal found that the magnitude of transactions does not alter the nature of transactions. The principle of consistency should apply, and the claim of the assessee should be held proper. Therefore, the Tribunal reversed the order of the authorities below and allowed the ground raised by the assessee, treating the income from the sale of shares as "Short Term Capital Gains".

Final Decision:
The assessee's appeal was allowed, and the order was pronounced in open court on 12/08/2016.

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