2018 (1) TMI 1142 - AT - Income Tax

Tribunal orders fresh review of Short Term Capital Gains as Business Income

The Tribunal directed a fresh adjudication by the CIT(A) concerning the treatment of Short Term Capital Gains under the head Business Income for ... Gains arising out of sale of shares/units - treated as business income instead of short term capital gain - set off speculation losses - Held that:- As decided in assessee's own case [2012 (3) TMI 544 - ITAT MUMBAI] We were informed that in earlier years when assessee suffered Capital Loss the AO treated them as business loss and Speculation loss - as seen from the paper book placed, the assessee had made specific request to the Assessing Officer to set off speculation losses determined in earlier year’s consequent to change of head from short term capital loss to speculation loss on the same set of transactions. Therefore, we are of the opinion that this aspect of the claim has to be examined by the authorities, since earlier year orders were not available on record. In case the Assessing Officer treated the short term capital loss in earlier years as business income and consequently as speculation loss by virtue of provisions of section 73 Explanation (2), similar treatment is also required in this year. Respectfully following the principles laid down by the Hon'ble Bombay High Court in the case of Lokmat Holdings [2010 (2) TMI 94 - BOMBAY HIGH COURT] the assessee’s contentions prima facie are to be allowed. Since it requires examination of the treatment given by AO in earlier years, we are of the opinion that the matter can be restored to the file of the CIT (A) who after giving due opportunity to the Assessing Officer and the assessee, should examine and consider the claim afresh - Therefore, respectfully following the same, we restore the issue back to the file of Ld. CIT(A) on similar lines. Issues:1. Treatment of certain Short Term Capital Gains under the head Business Income or Capital Gains for Assessment Year 2008-09.Analysis:The appeal pertains to the treatment of Short Term Capital Gains under the head 'Business Income' instead of 'Short Term Capital Gain' for Assessment Year 2008-09. The background reveals that the Assessing Officer (AO) determined the income after adjustments, which was contested by the assessee before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) partially upheld the AO's decision. Subsequently, the assessee raised two grounds of appeal before the Tribunal, focusing on the disallowance under section 14A and the treatment of Short Term Capital Gains. The Tribunal addressed the disallowance issue but overlooked the treatment of Short Term Capital Gains, prompting a recall of the order for re-adjudication. The appeal was presented before the Tribunal for re-examination concerning the treatment of Short Term Capital Gains. The assessee contended that the gains should be classified as Short Term Capital Gains rather than Business Income, emphasizing the need to adjust speculation losses from previous years against the current income from share trading. The Tribunal, referring to a similar case for AY 2006-07, acknowledged the relevance of the issue and decided to remit the matter back to the CIT(A) for fresh adjudication. The Tribunal highlighted the importance of examining the treatment given by the AO in earlier years and directed the CIT(A) to consider the claim afresh in light of legal principles and jurisdictional judgments. The Tribunal allowed the assessee's appeal for statistical purposes based on the restoration of the issue to the CIT(A) for reevaluation.In conclusion, the Tribunal recognized the significance of the issue regarding the treatment of Short Term Capital Gains under the head Business Income and directed a fresh adjudication by the CIT(A) in accordance with legal principles and past precedents. The decision to restore the matter for reevaluation indicates the Tribunal's commitment to ensuring a thorough examination of the claim and appropriate consideration of the assessee's contentions.