Dy. CIT v. Mukeshbhai Babulal Shah

SUBSCRIBE FOR FULL CONTENT


The Tax Publishers2013 TaxPub(DT) 1531 (Rkt-Trib) : (2013) 052 (II) ITCL 0081 : (2013) 057 SOT 0045 Income Tax Act, 1961 --Business income--Purchase and sale of shares on delivery basis Assessee's intention to realise profit quickly--assessing officer noticed that profits from transactions on account of trading in Future and Options had been shown as business income while profits from transactions in respect of shares purchased and sold on delivery basis had been shown as capital gain and concluded that profits from purchase and sale of shares on delivery basis were in the nature of business income and not in the nature of capital gains as claimed by assessee. However, Commissioner (Appeals) accepted the claim of assessee that the impugned profits from purchase and sale of shares were in the nature of short-term capital gain as claimed by assessee and not in the nature of business income as held by assessing officer following the judgment of Tribunal in Sugamchand C. Shah v. Asstt. CIT 2010 TaxPub(DT) 1398 (Ahd-Trib) : (2010) 37 DTR (Ahd) (Trib) 345. Revenue aggrieved, by this decision appealed before Tribunal. *Held :* Going through the facts the stock turnover ratio was as high as 1:16 and capital-turnover ratio was as high as 1:14 which was normally found in business and not in investment. This shows that the intention of assessee was to turn over the stock as frequently as possible to ensure quick realization of profits on sale of shares. Also in the Tax Audit Report, the nature of the business of assessee had been shown as trading of shares and had no other business. Further, assessee had utilized its own funds for trading not only in futures and options but also in purchase and sale of shares. All these facts clearly indicated that the dominant intention of assessee behind purchase and sale of shares was to quickly realize profits by frequently turning over the stock of shares and not to earn dividend from them. Therefore, the view taken by assessing officer that the income arising from purchase and sale of shares was in the nature of business income as defined under section 28 read with section 2(13). Income Tax Act, 1961, Sections 28 & 45 In The Itat, Rajkot Bench T. K. Sharma, J.M. & D.K. Srivastava, A.m. Dy. CIT v. Mukeshbhai Babulal Shah IT Appeal No. 318 (Rajkot) of 2011 A.Y. 2008-09 8 February, 2013 Appellant by : Ankur Garg Respondent by : Apurva Mehta ORDER *D. K. Srivastava, A.M.* SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 1531 (Rkt-Trib) : (2013) 052 (II) ITCL 0081 : (2013) 057 SOT 0045

Income Tax Act, 1961

--Business income--Purchase and sale of shares on delivery basis Assessee's intention to realise profit quickly--assessing officer noticed that profits from transactions on account of trading in Future and Options had been shown as business income while profits from transactions in respect of shares purchased and sold on delivery basis had been shown as capital gain and concluded that profits from purchase and sale of shares on delivery basis were in the nature of business income and not in the nature of capital gains as claimed by assessee. However, Commissioner (Appeals) accepted the claim of assessee that the impugned profits from purchase and sale of shares were in the nature of short-term capital gain as claimed by assessee and not in the nature of business income as held by assessing officer following the judgment of Tribunal in Sugamchand C. Shah v. Asstt. CIT 2010 TaxPub(DT) 1398 (Ahd-Trib) : (2010) 37 DTR (Ahd) (Trib) 345. Revenue aggrieved, by this decision appealed before Tribunal. Held : Going through the facts the stock turnover ratio was as high as 1:16 and capital-turnover ratio was as high as 1:14 which was normally found in business and not in investment. This shows that the intention of assessee was to turn over the stock as frequently as possible to ensure quick realization of profits on sale of shares. Also in the Tax Audit Report, the nature of the business of assessee had been shown as trading of shares and had no other business. Further, assessee had utilized its own funds for trading not only in futures and options but also in purchase and sale of shares. All these facts clearly indicated that the dominant intention of assessee behind purchase and sale of shares was to quickly realize profits by frequently turning over the stock of shares and not to earn dividend from them. Therefore, the view taken by assessing officer that the income arising from purchase and sale of shares was in the nature of business income as defined under section 28 read with section 2(13).

Income Tax Act, 1961, Sections 28 & 45

In The Itat, Rajkot Bench

T. K. Sharma, J.M. & D.K. Srivastava, A.m.

Dy. CIT v. Mukeshbhai Babulal Shah

IT Appeal No. 318 (Rajkot) of 2011

A.Y. 2008-09

8 February, 2013

Appellant by : Ankur Garg

Respondent by : Apurva Mehta

ORDER

D. K. Srivastava, A.M.