Listed shares and Securities treated as Stock-in-Trade by Assessee is to be Treated as Business Income regardless of Period of Holding: ITAT [Read Order]

The Chennai Bench of Income Tax Appellate Tribunal (ITAT) has held that listed shares and securities which had been treated as stock in trade by assessee should be treated as business income regardless of period of holding.

The assessee, Chandra Ramesh was an individual and engaged in the business of trading in shares and securities and also rendering consultancy services in the financial sector. The assessee was a member of Bangalore Stock Exchange in individual capacity and a member of National Stock Exchange (NSE). The assessee had filed his return of income for the assessment year in question and declared profit/loss arising from purchase and sale of shares and securities, under the head income from business and profession.

The Assessing Officer, assessed profit/loss derived from trading in shares and securities under the head capital gains. The assessee carried the matter in appeal before the Tribunal and the ITAT, Chennai Benches had set aside the issue to the Assessing Officer for fresh examination.

In pursuant to directions of the Tribunal, the Assessing Officer took up the case for verification and called upon the assessee to file necessary details to justify income declared under the head profit and gains from business and profession towards purchase and sale of shares. Since, the assessee could not substantiate the claim with relevant evidence, the Assessing Officer assessed the income under the head capital gains.

D. Hema Bhupal, on behalf of the revenue contended that the Assessing Officer had rightly assessed profit/loss from share trading under the head income from capital gains, because the assessee could not file necessary evidence including books of accounts and tax audit report to prove his case.

The two-member Bench of Mahavir Singh, (Vice President) and Manjunatha G,  (Accountant Member) observed that the Central Board of Direct Tax (CBDT), vide Circular No. 6/2016 dated 29.02.2016, had already clarified the issue of taxability of surplus on sale of shares and securities and as per said Circular, it had been very well explained that “where the assessee itself, irrespective of the period of holding of the listed shares and securities opted to treat them as stock in trade, the income arising from transfer of such shares/securities would be treated as business income.”

It was further observed that the assessing officer and CIT(A), were completely erred in assessing profit/loss from share trading activity under the head income from capital gains as against the assessee’s admission under the head income from business and profession.

The Bench set aside the orders of the CIT(A) for all three assessment years and directed the Assessing Officer to assess income derived from purchase and sale of shares under the head income from business and profession as claimed by the assessee.

To Read the full text of the Order CLICK HERE

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