ITO, WD-31(3), KOLKATA, KOLKATA vs. M/S DILIP B. DESAI (HUF), KOLKATA

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ITA 351/KOL/2016Status: DisposedITAT Kolkata09 May 2018AY 2011-20123 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee has consistently treated shares as investments in its books and declared gains as capital gains. Previous assessments and subsequent assessments also accepted this treatment. Therefore, the CIT(A)'s direction was upheld.

What were the facts?

The assessee declared gains from share and mutual fund transactions as Short Term Capital Gains. The Assessing Officer (AO) treated these gains as business income, considering the volume and nature of transactions. The CIT(A) directed the AO to compute the income under the head 'Income from Capital Gains'.

What were the issues?

Whether gains from share transactions should be treated as capital gains or business income, and the consistency of such treatment across assessment years.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH: KOLKATA

Hearing: 21.02.2018Pronounced: 09.05.2018

Per Shri A.T.Varkey, JM

1.

The appeal filed by the revenue is against the order of Ld. CIT(A)-9, Kolkata dated 16.12.2015 for AY 2011-12.

2.

The sole issue involved in this appeal of revenue is against the order of Ld. CIT(A) in directing to compute the income of the assessee under the head Income from Capital Gains instead of Business Income as determined by AO.

3.

Briefly stated facts of the case as observed by the AO are that the assessee is a HUF and has declared gain from share investment and mutual fund. The said gain has been shown as Short Term Capital Gain. During the course of assessment proceedings, the assessee was asked as to why the gain on share transaction should not be treated as trading receipt instead of investment keeping in view the number of shares in which the assessee transacted and the amount involved, dividend on total outlay, period of holding of shares and total number of companies in respect of which transaction done. In response, the Ld. AR of the assessee furnished written submission on all the above points and some other points also and placed his reliance on various case laws, which is available in the assessment order. After considering the details furnished by the assessee and the facts of the case, the AO concluded that the share transaction done by the assessee is in the nature of trade and is not investment. Hence, an amount of Rs.1,06,51,042/- declared as STCG on sale of shares was treated as business income of the assessee instead of income from capital gains as stated by the assessee. On appeal, the ld. CIT (A) directed the AO to the compute income/loss of the assessee for the year under consideration by treating the same under the head “Income from capital gains.” Aggrieved, revenue is before us.

4.

We have heard rival submissions and gone through the facts and circumstances of the case. The recent CBDT circular No. 6/2016 on 29.02.2016 has given the tax payer the option to decide the nature of his income arising on account of sale of listed shares/securities. The basic idea of issuing the circular is to halt the increasing litigation in this regard. However, it needs to be kept in mind that tax payer has to take a stand either to treat the income from sale of shares as capital gain or business income and not to change it in subsequent year. We note that assessee has been always reflected the shares as investment in its books. The AO has contested this claim of the assessee in AY 2006-07 and AY 2009-10, which has been reversed by Ld. CIT(A)-XIX as evident from the impugned order of Ld. CIT (A)-9. Moreover, it has been brought to our notice that AO in scrutiny assessment u/s. 143(3) of the Act for AY 2014-15 and 2015-16, has accepted the capital gain from sale of shares of the assessee. In such a scenario, when assessee has been consistently reflecting the shares as investments in his books and shown the gain as capital gains, the claim of assessee ought to have been allowed. The Ld. CIT (A) has rightly done so. So, no interference is called for. The appeal of revenue is dismissed.

5.

In the result, appeal of revenue is dismissed.

Order is pronounced in the open court on 09.05.2018

Sd/- Sd/- (M. Balaganesh) (Aby. T. Varkey) Accountant Member Judicial Member Dated :9th May, 2018 Jd.(Sr.P.S.)

Copy of the order forwarded to:

1. 1. Appellant – ITO, Wd-31(3), Kolkata. Respondent – M/s. Dilip B. Desai (HUF), 1A, Devarati, 1st floor, 8, Dr. 2 Rajendra Road Kolkata-700 020.

3. The CIT(A) Kolkata.

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