Tribunal clarifies capital gains treatment for shares, stresses consistency and CBDT Circular guidance.

The Tribunal allowed the appeal, directing the AO to treat the income from the sale and purchase of shares as short term and long term capital gains. The decision emphasized the importance of consistency in treating shares as investment or stock-in-trade, based on past practices and CBDT Circular, to avoid uncertainty and reduce litigation. The appellant's claim for a deduction under section 88E equal to securities transaction tax paid was not specifically addressed in the judgment.

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Issues:

1. Whether the Short Term Capital Gain earned by the assessee on transfer of listed shares should be treated as income from business.
2. Whether the appellant is entitled to a deduction under section 88E equal to securities transaction tax paid.

Issue 1: Short Term Capital Gain Treatment

The appeal was against the CIT (A)'s order confirming the AO's decision to treat the Short Term Capital Gain of Rs. 38,48,344 earned by the assessee on transfer of listed shares as income from business. The assessee argued that the activity should be considered investment, not stock-in-trade, based on past practices and CBDT Circular No.6 of 2016. The Tribunal noted that the assessee consistently treated gains as investment in previous years, which was accepted by Revenue Authorities. The Tribunal examined the CBDT Circular and the case law of M/s. R.R. Hosiery and Smt. Urmila S. Mehta, emphasizing the importance of consistency in treatment. It concluded that the department cannot dictate the treatment of shares as trading activity in one year while accepting them as investment in other years. The Tribunal reversed the CIT (A)'s decision and directed the AO to treat the income from sale and purchase of shares as short term and long term capital gains.

Issue 2: Deduction under Section 88E

The appellant sought a deduction under section 88E equal to securities transaction tax paid. However, the judgment did not provide specific details or analysis regarding this issue.

In conclusion, the Tribunal allowed the appeal of the assessee, directing the AO to treat the income from the sale and purchase of shares as short term and long term capital gains, based on the principle of consistency and the CBDT Circular. The judgment emphasized the importance of factual consistency in treating shares as investment or stock-in-trade to avoid uncertainty and reduce litigation in such matters.

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