Tribunal directs reexamination of capital gain treatment, dismisses expenditure disallowance, appellant to argue on issue.

The Tribunal partially allowed the appeal, directing the AO to reexamine the treatment of short term capital gain as business income due to discrepancies in lower authorities' findings. The appellant's argument that shares were held for capital appreciation, not trading, was considered. However, the ground related to the disallowance of expenditure on fees paid for an increase in capital was dismissed as the appellant did not argue on this issue during the appeal. The Tribunal restored the issue of capital gain treatment to the AO for fresh adjudication.

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Issues:
1. Treatment of short term capital gain as business income.
2. Disallowance of expenditure on account of fees paid for increase in capital.

Issue 1: Treatment of short term capital gain as business income

The appellant, a company engaged in financial services, filed an appeal against the order of the CIT(A) confirming the AO's treatment of short term capital gain as business income for A.Y. 2011-12. The AO noted that the appellant categorized some shares as investments and others as stock in trade, maintaining a common accounting system for both. The AO observed that the shares in question were not part of the opening or closing stock, indicating intra-year stock transactions. The CIT(A) upheld the AO's decision. The appellant argued that the shares were held for capital appreciation, not trading, citing the average holding period, separate books for investments, and payment of security transaction tax on purchases. The Tribunal found discrepancies in the lower authorities' findings and directed the AO to reexamine the issue, considering the appellant's submissions and past treatment of similar transactions. The Tribunal allowed the appeal for statistical purposes, restoring the issue to the AO for fresh adjudication.

Issue 2: Disallowance of expenditure on account of fees paid for increase in capital

The AO disallowed an expenditure of &8377; 2,67,847 claimed by the appellant as revenue expenditure on filing fees paid to the ROC for increasing the share capital. The CIT(A) upheld this disallowance. During the appeal before the Tribunal, the appellant did not argue on this issue. Consequently, the Tribunal dismissed the ground raised by the appellant regarding this disallowance.

In conclusion, the Tribunal partially allowed the appeal filed by the appellant, directing the AO to reconsider the treatment of short term capital gain as business income while dismissing the ground related to the disallowance of expenditure on account of fees paid for an increase in capital.

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