STCG or Business Profit.

[Jamshed Mehta]

The applicability of S.111A vis-a-vis the CBTD Circulars and O.M.s.

A.O.s take the view ans pass Orders citing the ref. Circulars.

The A.O.s select certain criteria like frequency of sale/purchase, volume of transactions, holding period and regular monitoring of transactions as in the nature of business. On the other hand criteria like consistency, no business establishment, no interest or other expense decisions, no losses on MTM claim etc. are ignored.

Above all, the case laws up to the SC in every case quote S. 111A for Delivery based transactions to be investments, STCG or LTCG depending on the period of holding being less/more than 12 months.

Therefore why should the CBDT Circulars and O.M.s not be altered to be in line with S. 111A? A.O.'s just harass assessees with these documents.

Additionally, the CBDT Circulars and O.Ms cannot be contrary to law. The Supreme Court has held that circulars issued by the Board are binding in law on all tax authorities and assessees can rely on them for securing whatever relief they are entitled to under the circular.

Jamshed F. Mehta, Mumbai.

[DR.MARIAPPAN GOVINDARAJAN]

This discrepancy may be referred to CBDT in writing.

AI Summary

Classification of securities gains: conflict between statutory capital gains rule and administrative circulars prompts referral to the tax board. Assessing Officers often treat delivery-based securities sales as business income by applying selected criteria from CBDT circulars-frequency, volume, holding period, monitoring-while overlooking factors like absence of business establishment or related expenses; this practice can conflict with statutory classification under S. 111A, which differentiates short- and long-term capital gains by holding period, and the recommended administrative step is to refer the discrepancy to the CBDT in writing, given the binding nature of Board circulars.