2014 (1) TMI 490

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....or considering the questions of law as mentioned in para 7 of the appeal which are as under:-          (i) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was correct in holding that the sale of shares by the assessee was a capital gain and not profit and gain from business? (ii) Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was correct in directing the department to follow the principal of consistency and holding that the department cannot depart from the accepted position in the earlier years?" 2. Put shortly, the facts necessary for adjudication of the present appeal as narrated therein are that the assessee is a Punjab Gov....

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....resent appeal by the revenue. 3. Learned counsel for the appellant submitted that the investments made by the assessee in the shares and the sales thereof was exigible under the head profit and gain from business and not capital gains as has been held by the Tribunal. 4. After hearing learned counsel for the appellant, we do not find any merit in the appeal. The Tribunal while rejecting the contention of the revenue had held as under:-              "5. We have considered the rival submissions carefully. We have also perused the precedent referred the CIT (Appeals) in support of his conclusion that the activity of the assessee in investing in shares is not a business activity but....

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....s a business proposition of deal in the shares. The investment made in the shares of the companies which are jointly promoted by the assessee along with the private entrepreneurs, is with the basic object of promoting agro/horticulture based industry in the State of Punjab and not as a dealer in shares with the object of trading. In fact, the object of trading in shares is lacking in as much as the financial collaboration agreement itself prescribes that the shares shall be bought back by the private promoter after a specified period at a defined consideration. In fact, in the case of PSIDC Ltd. (supra), the Tribunal has also considered similar aspects and have held that the realization of such investment is liable to be taxed under the hea....

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..... In the present case, as has been found by the Tribunal, the assessee was advancing the industrial policy of the State and in that process, investment was made in the new projects and after level of self sufficiency was achieved, disinvestment was done. The view of the Tribunal that realization of investment was liable to tax under the head capital gains was certainly a possible view, particularly when the revenue itself has been accepting this position upto the assessment year 1989-90. Judgment of Madras High Court, in facts of the present case, does not support the stand of the revenue. 12. Whether income in a particular case falls under the head of capital gains or business depends upon nature of business of the assessee and attending ....