TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 105
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....es. (3) The Id. Commissioner of Income Tax has further erred in overlooking the assessment order passed by the Assistant Commissioner of Income Tax 4(2), Mumbai for AY 2006 -07 in respect of the same point in case of your petitioner. (4) The Learned Commissioner of Income Tax has erred in ignoring the direction given in para 3(a) of the circular dated 29.02.2016. (5) The order appealed against is bad in law and is against the principle of natural justice. (6) The order appealed against is based on surmises and conjectures. (7) Your Petitioner resents the right to add, lo delete and/or amend any of the foregoing grounds." 2. Briefly stated, the assessee had e-filed his return of income for A.Y 2008-09 on 23.09.2008 declaring an income of Rs. 75,73,090/-. The return of income was initially processed as such u/s 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment u/s 143(2) of the Act. 3. Original assessment was framed by the A.O vide his order passed u/s 143(3), dated 15.12.2010, wherein he had re-characterized the profit/surplus of Rs. 71,73,008/- that was earned by the assessee on sale of shares as his business income, as again....
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..... A.R that as the aforesaid shares were purchased and held by the assessee as a capital asset, therefore, he had in his return of income rightly offered the income arising on the sale of the same under the head STCG. It was submitted by the ld. A.R that the aforesaid arbitrary classification of the income/surplus on sale of shares under the different heads of income by the CIT(A) was devoid and bereft of any logical basis or reasoning. It was submitted by the ld. A.R that the CIT(A) for classifying the income/surplus arising on the sale of the shares as business income or STCG had strictly gone by the period of their holding which had resulted to unreasonable results. Elaborating on his aforesaid contention, it was submitted by the ld. A.R that pursuant to the aforesaid basis adopted by the CIT(A) the income/surplus arising on sale of shares that were purchased by the assessee in a single lot had been subjected to tax under the different heads of income i.e business income and STCG. It was submitted by the ld. A.R that the period of holding of shares was though a material factor but not the only one for determining the head of income under which the income/surplus on sale of shares....
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....respective heads of income, viz. business income or STCG. However, we find substance in the claim of the ld. A.R that the period of holding of shares is though a material factor but not the only one for determining the head of income under which the income/surplus on sale of shares is to be brought to tax. As pointed out by the ld. A.R, and rightly so, adoption of the period of holding of shares as a standalone basis for classifying the income/surplus arising on their sale under the respective heads of income i.e business income or STCG had in stray instances resulted to incongruous results, and the income/surplus arising on sale of shares that were though purchased by the assessee in a single lot was assessed under different heads. Say, for instance, if out of a lot of 100 shares that were purchased by way of single transaction the assessee had sold 60 shares after holding the same for 5 days and 40 shares after holding for 6 days, then, on the aforesaid standalone basis adopted by the CIT(A) the income/surplus arising from the said respective transactions would be subjected to tax under the head business income and STCG, respectively. At this stage, we may herein observe that a v....
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.... income arising on a subsequent sale of the same as per sub-section (2) of Sec. 45 of the Act would be bifurcated into two parts, viz. (i) the fair market value of the capital asset on the date of such conversion or treatment by the assessee as stock-in-trade shall be deemed to be the full value of consideration received or accruing as a result of the transfer of the capital asset for the purposes of Sec. 48 of the Act; and (ii) the profit or gains arising on sale of such stock-in-trade shall thereafter be assessed as the business income of the assessee; both of which shall be chargeable to income-tax in the previous year in which such stock-in-trade is sold or otherwise transferred by the assessee. We, thus, on the basis of our aforesaid deliberations are of the considered view that if the income/surplus arising from the sale of shares (forming part of a lot purchased by the assessee) had undisputedly been subjected to tax as STCG, then, by way of an implication it can safely be inferred that the said entire lot of shares was purchased by the assessee with an intention to hold the same as a capital asset. Accordingly, backed by the aforesaid fact the income/surplus arising on the ....