TaxTMI 
TaxTMI 
2026 (4) TMI 1623
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....d 21.08.2025 passed for A.Y. 2017-18. 2. The Revenue has raised the following grounds of appeal: "(a) Whether, the Ld. Commissioner of Income-Tax (Appeals) has erred in law and on facts in deleting the addition treating capital gains as business income of Rs. 8,51,46,889/- even though the assessee has primarily traded in shares of only one entity & the period of holding in some cases was on 3 days. (b) Whether, on the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has not appreciated that the intent of the transactions was under question. (c) Whether, on the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) ought to have upheld the order of the ....
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.... made out of own funds and business surplus. The assessee also submitted that the shares were consistently reflected as investments in the books and that there was no intention to carry on trading activity. 6. However, the Assessing Officer rejected the explanation primarily on the ground that the assessee had utilized unsecured loans for making investments in shares and that such loans were repaid upon sale of shares, indicating a systematic and profit-oriented activity akin to business. The Assessing Officer held that the entire activity constituted business activity. Accordingly, the Assessing Officer treated both STCG of Rs. 8,51,46,889/- and LTCG of Rs. 4,58,83,452/- aggregating to Rs. 13,10,30,341/- as business income and made addi....
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....ns were limited, largely confined to a single scrip (Kushal Ltd.), and there was no frequency, multiplicity or organized activity indicative of trading. 8. The CIT(Appeals), after considering the assessment order, submissions of the assessee and material on record, first addressed the issue of Rule 46A and observed that the documents relied upon by the assessee were not in the nature of fresh additional evidence but were already part of the assessment record or constituted elaboration of earlier submissions. Accordingly, the same were admitted and considered for adjudication on merits. 9. On the substantive issue, the CIT(Appeals) observed that the Assessing Officer had failed to carry out any objective analysis of relevant factors su....
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....sue of borrowed funds, the CIT(Appeals) held that the Assessing Officer's reliance on this factor was misplaced and contrary to settled law. Relying on jurisdictional High Court decisions, the CIT(Appeals) held that utilization of borrowed funds, in absence of other indicators of business activity, does not alter the character of investment transactions. In the present case, the assessee's intention to invest was clearly borne out from the books of account, holding pattern, and overall conduct. 12. In view of these detailed findings, the CIT(Appeals) held that the entire addition of Rs. 13,10,30,341/- made by treating capital gains as business income was unsustainable both in law and on facts and accordingly deleted the same. Since the a....
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....ccount of the assessee. 16. In such factual background, we find that the Ld. CIT(Appeals) has correctly applied the binding CBDT Circular No. 6/2016 dated 29.02.2016, particularly para 3(b), which mandates that where listed shares are held for more than 12 months and the assessee treats the same as investments, the Assessing Officer shall not dispute the characterization of income as capital gains. The Assessing Officer, in the present case, has disregarded the said binding circular without recording any finding that the transactions were non-genuine. Therefore, the Ld. CIT(Appeals) was justified in holding that the Long Term Capital Gain of Rs. 4,58,83,452/- is to be assessed under the head "Capital Gains" and is eligible for exemption ....
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....ention of the assessee is to hold the shares as investments. Similarly, the Hon'ble Bombay High Court in CIT vs. Gopal Purohit (2010) 188 Taxman 140 (Bom) has upheld the importance of consistency and intention in determining the nature of income from share transactions. The ratio laid down in these judgments squarely applies to the facts of the present case. 19. We further find that the Assessing Officer has not carried out any objective analysis with respect to frequency of transactions, holding period, intention at the time of purchase, or treatment in the books of account, and has proceeded merely on presumptions arising from the flow of funds. In contrast, the Ld. CIT(Appeals) has dealt with each of these aspects in detail and has re....