Single Transaction of Buying and Selling of Shares can’t be treated as Business Activity: ITAT [Read Order]

The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that a single transaction of buying and selling of shares cannot be treated as a business activity for the purpose of imposing tax liability on the assessee under the Income Tax Act, 1961.

In the instant case, the assessee has purchased 1,25,000/- equity shares of ING Vysya Bank during the month of January and February 2009, and subsequently during the month of September 2009 all the shares are sold. The assessee also declared the above transaction in its books of accounts as an investment and accordingly claimed the same as capital gain while filing his income tax returns for the relevant period.

The Assessing Officer rejected the claim and held that the holding period is only seven months therefore, it has to be treated as a business income and the same view has been confirmed by the Ld. CIT(A).

The Tribunal bench comprising Accountant Member G Manjunatha and Judicial Member V Durga Rao observed that the assessee has purchased equity shares of ING Vysya Bank, the same were sold subsequently it is only a single transaction simply because the assessee has sold shares within a period of seven months, it cannot be said that the intention of the assessee to carry the purchase and shares as a business activity.

“It has to be seen the total activities of the assessee i.e., whether the assessee is buying some shares selling again and purchasing the same if the activity is continued activity buying and selling it may be inferred that the assessee’s intention is to do business in shares. In this case, the single transaction has been done by the assessee. In our view, the activity carried by the assessee i.e., buying and purchase of shares of ING Vysya Bank is an investment, not a business activity. Accordingly, we reverse the order passed by the CIT(A), and the appeal filed by the assessee is allowed,” the Tribunal said.

Support our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.