|Bombay High Court
|G. S. Kulkarni J, M. S. Sanklecha J
|28, 45, 48
|Business profits, capital gains, shares
|Dr. K. Shivram
|September 9, 2015 (Date of pronouncement)
|September 16, 2015 (Date of publication)
|Click here to download the file in pdf format
|Circumstances in which gains from sale of shares can be assessed as short-term capital gains and not as business profits explained
Judgement of CIT(A) and Tribunal that assessee is an investor and not a trader on the basis of the following facts cannot be faulted:
(a) assessee has been an investor in shares and has consistently treated its entire investment in shares as “investment in shares” & not “stock-in-trade”;
(b) the income earned on sale of shares was offered as short term capital gains even when losses were suffered in a particular year;
(c) dealing in 35 scrips, involving 59 transactions for the entire year could not be considered for high volume so as to be classified as trading income;
(d) the assessee earned 75% of the income as short term capital gains by holding shares for more than nine months;
(e) no transfer in shares was done by the assessee for over 75% of working days during the year;
(f) 56% of the Short term capital gains during the year resulted from shares held during the earlier assessment year as a part of the opening investment on 1 April 2007.
(g) the assessee had not resorted to churning of shares or repetitive transactions in shares of the same company.
(h) for the earlier Assessment Years i.e. AY 2005-06 and AY 2006-07, the Assessing Officer had, in the proceedings under Section 143(3) of the Act, accepted the stand of the respondent assessee and taxed the profit earned on purchase and sale of shares as short term capital gains;
(i) dividend Income earned was over Rs.8.50 lakhs;
(j) the assessee had not borrowed any funds but has used her own funds for the purpose of investment in shares;
(k) all transactions were delivery based transactions; and
(l) the speculation loss to which the Assessing Officer has made reference was in fact not so, but happened as a result of punching error
On consideration of the above facts, the CIT (A) and Tribunal rightly concluded that compliance on the part of the assessee in terms of Instruction No.1827 dated 31 August 1989 issued by the Central Board of Direct Taxes laying down the tests for distinguishing the shares held in stock-in-trade and shares held as an investment, the shares held by the assessee was investment and held the income to be treated as short term capital gains.