Profit from Transfer of Shares and units of Mutual Fund are Capital Gain, not Business Income: ITAT Ahmedabad [Read Order]

Profit from Transfer of Shares and units of Mutual Fund are Capital Gain, not Business Income: ITAT Ahmedabad [Read Order]

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In a recent ruling, the ITAT, Ahmedabad bench held that the profit arising out of purchase and sale of shares and investing in mutual funds are capital gain. By relying upon the CBDT Circular No.6/2016 dated 29.2.1016, the Tribunal observed that such income shall not be treated as business income if the assessee treats the same as capital gain.

In the instant case, assessee is a limited company engaged in the business of manufacturing of dyes intermediates & fine chemicals. The assessing authority and the first appellate authority held that assessee’s profit on purchase and sale of shares and units of mutual fund was held to be treated as business income. The assessee maintained that their man business is manufacturing of dyes intermediates & fine chemicals. Therefore, the assessee preferred an appeal before the Appellate Tribunal by contending that the said income should be considered as their capital gain.

The assessee’s main object as per Memorandum of Association is of business of manufacturing and purchase and sale of dyes intermediates and fine chemicals. Further, assessee has been claiming the gain/loss from transactions of sale/purchase of shares and mutual funds as short term and long term capital gain since last many years and Revenue has been regularly accepting the same. It was also noted by the division bench that investments in shares and mutual funds are being separately shown at cost price in the audited balance sheet. Reliance was placed on the CBDT Circular No.6/2016 dated 29.2.1016. As per clause 3(b) of the above Circular reads that assessee if desires to treat the income arising from transfer of shares and securities as capital gain the same shall not be put to dispute by the Assessing Officer. The Tribunal observed that the above circular is applicable in the case of assessee.

Read the full text of the order below.

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