Recently, in CIT v. M/S Jindal Poly Films Ltd, the division bench of the Allahabad High Court held that income received on the sale of Equity shares held by assessee for about 16 years is ‘Long Term Capital Gain’, Not ‘Business Income’.
The equity shares in question were held by the assessee company since 1988-89 as a long term investment i.e. for a period of more than one year prior to the relevant assessment year. The equity shares were transferable through recognized stock exchange. On sale of the same, the AO treated the sale consideration as Business income of the assessee. On appeal, the Tribunal held that the same constitute ‘Long Term Capital gain’.
The High Court noticed the CBDT Circular No.6 of 2016 dt. 26.02.2016 which stipulates that in order to reduce litigation, the sale of listed shares would be treated as capital gain if they are held by the assessee for a period of more than 12 months immediately preceding the date of these transfers.
In view of the above circular and the admitted fact that the assessee have held the listed shares for a period more than 16 years, Justice Pankaj Mithal and Justice Vinod Kumar Misra concluded the matter in favour of assessee and held that the income derived from their transfer has rightly been treated as Long Term Capital Gain and not as business income.
Read the full text of the Judgment below.
