BHARAT DAMJI SAVLA,MUMBAI vs. ACIT 20(1), MUMBAI
What did the Tribunal hold?
The Tribunal found merit in the assessee's alternative argument. If capital gains are treated as business income, the profit and loss account needs recasting, and related expenses must be considered.
What were the facts?
The assessee treated short-term capital gains from shares as investment income, but the Assessing Officer treated it as business income. The assessee argued that if it's business income, then the entire profit and loss account should be recast and related expenses allowed.
What were the issues?
Whether short-term capital gains on shares should be treated as business income, and if so, whether related expenses should be allowed and the profit and loss account recasted.
Which sections of the Income-tax Act were involved?
Not specified
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCHES “B”, MUMBAI
Before: Shri Joginder Singh, & Shri Sanjay Arora
आदेश / O R D E R Per Joginder Singh (Judicial Member)
The assessee is aggrieved by the impugned order dated 13/12/2011, of the ld. First Appellate Authority, Mumbai, on the ground as stated in the grounds of appeal.
2. Grounds no. 1 & 2 treating the short term capital gains of Rs.57,18,634/- as business income ignoring that the assessee is an investor and not a trader and the shares were held as investment and not stock in trade and further holding that the shares were purchased during the year and sold during the year were business income, both these grounds were not pressed by the ld. counsel for the assessee. The ld. DR had no objection to the submissions of the assessee, therefore, both these grounds are dismissed as not pressed.
2.1. The alternative ground i.e. ground no.3 (a) and (b) are that the ld. Commissioner of Income Tax (Appeals) did not appreciate the fact that if the capital gain are treated as business income then the entire profit and loss account has to be recasted by taking the opening stock and closing stock after deducting all expenses in relation to the business and all the net income may be taxed and further not allowing the expenses such as de-mat charges, interest expenses, bank charges, etc from the profit from sale of share and to set off earlier years business losses from the said profit.
2.2. During the hearing, the crux of arguments is identical to the ground raised by inviting our attention to page-9 to the statement of income and page
10. (of the paper book) containing trading and profit & loss account for the year ending 31/03/2008, by explaining that the ld. Assessing Officer has not allowed the expenses. The ld. DR, though defended the conclusion arrived at by the ld. Commissioner of Income Tax (Appeals) but fairly admitted that if the Tribunal is inclined to send the matter to the file of the ld. Assessing Officer, then necessary direction may be issued to examine the claim of the assessee.
2.3. We have considered the rival submissions and perused the material available on record. We find force in the alternative argument of the assessee, because, if the capital gains is to be treated as business income then the entire profit & loss account needs to be recasted and the related expenses, incurred by the assessee, in relation to the business has to be considered such as de-mat charges, interest expenses, bank charges, if any. Thus, the ld. Assessing Officer is directed to examine the claim of the assessee and after providing due opportunity to the assessee, decide in accordance with law. Needless to add, there has to be consistency in the manner of valuation of the stock-in-trade as at the beginning and the close of the year. Further, only the closing stock as determined would stand to be carried forward to the following year. The assessee is also at liberty to furnish necessary evidence, in support of his claim. Thus, this ground of the assessee is allowed for statistical purposes.
Finally, the appeal of the assessee is partly allowed for statistical purposes.
This order was pronounced in the open court in the presence of ld. representative from both sides at the conclusion of the hearing on 29/02/2016.
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