In ITO v. Manusi Securities Pvt. Ltd, the division bench of the ITAT Ahmedabad held that the income from sale & purchase of shares of a Company trading in securities is taxable under “Business Income”.
The bench, while rejecting the claim of the assessee, observed that the assessee cannot claim capital gain on such transactions and CBDT Circular dated 15.06.2007 do not have any relevance in such cases.
The assessee-Company, in the instant case was engaged in trading of shares and securities- shown its income from sale and purchase of securities under the head “Short Term Capital Gain”. Assessing Officer completed assessment by holding that the assessee had a huge number of transactions during the relevant assessment year.
On first appeal, the CIT(A) allowed the plea of the assessee. dissatisfied with the order, Revenue carried the matter before the ITAT contending that the total profit from alleged share transactions are from purchase and sale of single scrip and it seems that assessee entered into these transactions as business dealings only but when the profit reached to a figure of Rs.1,13,05,165/-. It was vehemently contended on behalf of the Revenue that the assessee declared the said income as capital gain with a view to save tax. According to them, the pattern of transactions effected cannot be treated as ‘investment activity’.
Allowing the above contentions, the bench noted that assessee is regularly in the business of purchase-sale of equity shares, share transactions entered during the year were in large number, funds were borrowed for the purpose of trading, no separate account has been maintained for the investment portfolio and all the transactions of purchase sale raised are only for one scrip namely Suraj Stainless Steel Ltd. “In these facts and circumstances, assessee cannot take shelter of the CBDT Circular no. 4/2007 dated 15.06.2007.”
Read the full text of the order below.