The Delhi bench of the Income Tax Appellate Tribunal (ITAT) last day held that the income derived by the assessee from the huge magnitude of sale and purchase of shares cannot be considered under the head “capital gains” and the same has to be treated as capital gains.
The assessee is engaged in the business of buying, selling and dealing in securities of any kind, shares, debentures, debentures stock, properties, bonds, units, obligations and other securities. While completing the assessment, the Assessing Officer treated income earned by the assessee from alleged investments as ‘business income’ for year under consideration.
On behalf of the department, it was submitted that the frequency and the period during which assessee has purchased and sold shares of these 10 companies, clearly indicates intention that these were not ordinary purchases and sales made by assessee. Instead there was an object to derive income by way of profits. Emphasising upon the basic nature of share trading activity conducted by assessee, it was contended that the income derived by assessee from such huge magnitude of sale and purchase of shares cannot be considered under the head “capital gains”.
After hearing both the sides, the Tribunal noted that “the magnitude of purchases on each date has been very large in respect of all these shares. Thus in our considered opinion frequency and volume of purchase and sale of shares shows, intention of assessee was to generate income through trade, rather than invest in them.”
The Tribunal further noted the decision of the Delhi High Court in the case of D & M Components Ltd wherein it was held that where there was short duration of holding of shares and lack of clarity in account books, sale and purchase of shares would lead to business income and not short-term capital gains.
Based on the above decision, the Tribunal held that the income has to be treated as business income.
Subscribe Taxscan Premium to view the Judgment
