2017 (2) TMI 786 - AT - Income Tax

Income from share transactions categorized as Short Term Capital Gain (STCG) by Tribunal

The Tribunal upheld the CIT(A)'s decision to treat income from share transactions as Short Term Capital Gain (STCG) instead of business income. The ruling ... Income from transaction of purchase and sale of shares - STCG OR business income - Held that:- Transaction in the shares was treated by the Assessing Officer as income from Short Term Capital Gain in the earlier as well as in the subsequent years. No major change of any kind was brought into the notice by the revenue. The rule of consistency has properly been followed. In view of the said circumstances, we are of the view that the CIT(A) has passed the order judiciously and correctly treating the transaction of purchase and sale of shares as STCG instead of business income. - Decided against revenue. Issues:1. Treatment of transaction of purchase and sale of shares as STCG instead of business income.Analysis:The appeal before the Appellate Tribunal ITAT Mumbai concerned the order passed by the Commissioner of Income Tax (Appeals) relevant to the assessment year 2008-09. The revenue contended that the CIT(A) erred in treating the transaction of purchase and sale of shares as Short Term Capital Gain (STCG) instead of business income. The revenue argued that the assessee had a significant turnover of shares with a large number of transactions, some with a short holding period, and had used borrowed funds for investments, indicating a business income nature. On the other hand, the assessee maintained that she was an investor in shares, consistently treating them as investments and offering income from share transfers as capital gains. The CIT(A) analyzed the facts, including the number of transactions, holding periods, and source of funds, and concluded that the income should be treated as STCG, aligning with the assessee's investor status. The CIT(A) also highlighted the principle of consistency in previous assessments and cited legal precedents supporting the investor classification. The Tribunal upheld the CIT(A)'s order, emphasizing the importance of maintaining consistency and uniformity in such cases.In a detailed analysis, the CIT(A) considered various aspects of the assessee's share investments, emphasizing her consistent treatment of shares as investments over the years. The CIT(A) noted that the Assessing Officer had previously accepted the assessee's investor status in shares for the assessment year 2007-08. The CIT(A) further highlighted that the transaction details, holding periods, and source of funds did not align with a trading business but supported an investor profile. The CIT(A) referred to legal judgments and decisions by high courts and ITAT in favor of investors in similar circumstances, reinforcing the assessee's position. The CIT(A) concluded that the income from STCG should not be treated as business income based on the established facts and legal principles. The Tribunal concurred with the CIT(A)'s findings, dismissing the revenue's appeal and upholding the order treating the income as STCG.Overall, the judgment focused on the classification of income from share transactions as STCG or business income based on the nature of the assessee's activities, consistency in treatment, legal precedents, and factual analysis. The decision underscored the significance of maintaining uniformity in assessing such cases and upheld the CIT(A)'s order in favor of treating the income as STCG, considering the assessee's investor status and supporting evidence presented.