Sale proceeds of Investment in Shares made as 'Investor' treated as 'Capital Gains’, not as 'Business Income': ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench has held that sale proceeds of investment in shares made as 'investor' are treated as 'capital gains’, not as 'business income'.

The appellant, M/s. Chandan Infratech Ltd.is engaged in the business of consultancy service, trading, and investment in securities. During the assessment proceedings, the Assessing Officer noticed that the appellant traded in shares of Sintex Industries Limited (SIL) and earned a huge profit and claimed the same as a capital gain and added Rs. 19,34,10,140 to the total income, and demanded tax.

The counsel for the appellant submitted that he is maintaining its shareholding in two separate portfolios namely one as “investment” and another as “stock-in-trade”. For safeguarding the investment held by the appellant and by understating that value of the investment does not erode due to volatile conditions of the share market at times, depending upon the situation, the assessee has disposed of a part of its investment. Thus, the sale proceeds do not partake in the character of “business income” because what has been sold by the assessee is not stock-in-trade.

The Tribunal observed that Clause 3(b) of the above CBDT circular No. 6/2016 made it clear in respect of listed shares and securities held for more than 12 months immediately preceding the date of its transfer if the assessee desires to treat the income arising from the transfer thereof as Capital Gain, the same shall not be put to dispute by the Assessing Officer.

By relying on the decision of jurisdictional High Court DeepabenAmitbhai Shah vs. DCIT the Coram of Mr. Waseem Ahmed, Accountant Member, and Mr. T.R. Senthil Kumar, Judicial Member has held that “we hold that the sale of SIL shares held by the assessee as an investment is to be treated only as short-term capital gain and not as business income”

Mr. Milin Mehta appeared on behalf of the appellant and Mr. A. P. Singh appeared on behalf of the respondent.

To Read the full text of the Order CLICK HERE

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