Profit earned by Housewife from share Transaction is Business Income, Not Capital Gain: ITAT [Read Order]

The Delhi Bench of the ITAT, on Thursday, ruled that the profit earned by a Housewife on the purchase and sale of shares would amount to business income and net short-term capital gain under the provisions of the Income Tax Act, 1961.

The assessee is an individual and derives income from capital gain and other sources. While filing income tax return for the relevant assessment year, Assessee disclosed the net profit after claiming the deduction of the cost of shares and a donation made towards scientific research to M/s Himalaya Trust Dehradun. AO noted that the amount of deduction claimed was higher than that the amount donated.

During the course of proceedings, Assessee said that she conducted such transactions at the behest of her spouse. After the investigation, the AO treated the above income as Short Term Capital Gain (STCG) and disallowed the deduction of donation paid to Trust.

On appeal, the CIT(A) upheld the findings of the AO but allowed the alternative claim for deduction u/s 80GGA.

On the second appeal, the Assessee contended that a single transaction of purchase and sale of shares outside the assessee’s line of business may constitute ‘adventure in nature of trade’.

Allowing the appeal, the Tribunal noted that the AO did not doubt the genuineness of the transactions. “It is an undisputed fact that the Assessing Officer has not disbelieved the purchase and sale of shares on the basis of the various documents filed before him since ultimately he has treated the profit from the sale of shares as short-term capital gain. His grievance is that the assessee has manipulated the so-called shares and so-called transaction of shares of one private company is just to claim the deduction u/s 35 of the I.T. Act on the donation of Rs.31,00,000/-. The donation has also not been disbelieved. Under these circumstances, we have to consider as to whether the profit on the sale of such shares will constitute an adventure in nature of trade as claimed by the assessee or short-term capital gain as treated by the Assessing Officer and upheld by the ld. CIT(A).”

Citing a plethora of decisions, the bench directed the Assessing Officer to allow the claim of business income on account of profit on the sale of such shares.