Recently, the Income Tax Appellate Tribunal, Kolkata has held that the income from transaction of shares has to be categorized under the head ‘capital gain’ under the provisions of the Income Tax Act, 1961, despite the fact that the assesse is primarily engaged in the business of share trading. The Tribunal while relying upon the earlier order of the ITAT, has opined that the assessment order, as per which the said income is considered as “business income” is liable to be set aside.
The assesse-company, in the instant case is primarily engaged in the business of share trading. While filing income tax returns for the relevant AY, the assesse claimed that the income from sale of share transaction is liable to be treated as “capital gains.”However, the Assessing Officer completed the assessment by treating the said income under the head “business income” since the activities of the assesse for sale-purchase of share very frequently in a systematic manner and in volume.Further, it was observed that the object cause of the company also provides in dealing with shares.
On appeal, the Commissioner of Income Tax (Appeals), relying upon the decision of the ITAT favoring the assesse in the same issue for an earlier assessment year, held that the said income is “capital gains.”Being aggrieved, the Revenue preferred an appeal before the Appellate Tribunal.
The Tribunal noticed that, in the earlier decision, the Tribunal concluded that the income from share transaction must be considered as income from “capital gains”on the basis of the admitted fact that the shares were held by the assessee as investment and were being sold on having held for two years.
Following the above decision, the Tribunal dismissed the appeal by observing that no interference is needed to the above decision.
Read the full text of the order below.