Frequent Transactions in Shares won’t Constitute ‘Business’ If Assessee treated the same as ‘Investment’: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT) Kolkata on June 13^th held that frequent transactions in shares would not constitute ‘business’ if assessee treats these transactions as ‘investments’.

The Assessee, DPJ Viniyog Pvt. Ltd. had the main grievance that his short-term Capital Gain on sale of shares in Gati Ltd, which should be assessable under the head “Capital Gain”, has been assessed under the head “Income from business or profession”

When approached with appeal before the Commisioner of Income Tax (Appeals)[CIT(A)] it was held that the assessee was making purchase and sale on a continuous basis and besides being regular and systematic, it was said to be engaged in business activity and, therefore should be assessable under the head ‘business income’.

The Tribunal bench comprising of Judicial Member S.S. Viswanethra Ravi and Accountant Member A.L. Saini while disposing off the appeal in favour of the assessee held, “We have noted the intention of the assessee that the Board of Directors of the assessee company has passed the resolution stating that the motive of the company is to deal in investment and not to trade in shares, therefore, we are of the view that, considering the facts and circumstances of the assessee’s  income i.e Short term Capital Gain by way of sale of investment should be assessed under the head ‘capital gain’ instead of ‘business income’. Therefore, we direct the Assessing Officer to treat the assessee as an investor and assess the income under the head ‘Short term Capital Gain’.”