Trinetram Consultants (P.) Ltd. v. Dy. CIT

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The Tax Publishers2013 TaxPub(DT) 2170 (Mum-Trib) : (2013) 143 ITD 0634 Income Tax Act, 1961 --Head of income--Business income or capital gains Purchase and sale of equity shares and mutual funds--Assessee-company engaged in providing consultancy services to tours and travels and allied service had earned gain on purchase and sale of equity shares and mutual funds and claimed the same as short-term capital gain. It had shown purchase of shares and mutual funds as investment in the balance-sheet. Assessing officer treated the gain as income from business on basis of certain reasons. *Held :* Was not justified as Firstly, the assessee has, all throughout, been showing purchase of shares as investment in the books of account and the same had been classified in the balance sheet under the head 'Investment'; secondly, such a nature of transaction shown under the head 'Investment' had been treated to be capital gain in the earlier assessment years by the assessing officer under scrutiny proceedings, wherein the order had been passed under section 143(3). In the assessment year 2008-09, the Commissioner (Appeals) accepted the gain from transactions of shares to be assessable under the head 'Short-term capital gain'. Thus, if the same facts were permeating through all the assessment years, it could not be held that on similar nature of transactions, the income from shares had to be assessed as 'Income from business', thirdly, all the transactions undertaken by the assessee were delivery based and the assessee had not undertaken any speculative or derivative trading of shares. This showed that the assessee's intention was never to indulge in trading of shares; and fourthly, no interest bearing borrowed funds or loans had been diverted for purchase of shares, rather they had been purchased from the surplus funds available with the assessee. Lastly from the details of short-term capital gain, it was seen that most of the gain had come from sale of mutual funds, which could not be traded in Stock Exchange. This also proved that the assessee was mainly an investor. Therefore, the assessee's intention mainly was to purchase the shares for holding it as investment. Income Tax Act, 1961, Section 14 Read with Sections 2 (42B), 28 (i) & 45 In The ITAT, Mumbai E Bench B. Ramakotaiah, A.M. & Amit Shukla, J.M. Trinetram Consultants (P.) Ltd. v. Dy. CIT IT Appeal Nos. 3063 & 3064 (Mum.) of 2011 A.Ys. 2006-07 & 2007-08 5 April, 2013 Appellant by : Vijay Mehta SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 2170 (Mum-Trib) : (2013) 143 ITD 0634

Income Tax Act, 1961

--Head of income--Business income or capital gains Purchase and sale of equity shares and mutual funds--Assessee-company engaged in providing consultancy services to tours and travels and allied service had earned gain on purchase and sale of equity shares and mutual funds and claimed the same as short-term capital gain. It had shown purchase of shares and mutual funds as investment in the balance-sheet. Assessing officer treated the gain as income from business on basis of certain reasons. Held : Was not justified as Firstly, the assessee has, all throughout, been showing purchase of shares as investment in the books of account and the same had been classified in the balance sheet under the head 'Investment'; secondly, such a nature of transaction shown under the head 'Investment' had been treated to be capital gain in the earlier assessment years by the assessing officer under scrutiny proceedings, wherein the order had been passed under section 143(3). In the assessment year 2008-09, the Commissioner (Appeals) accepted the gain from transactions of shares to be assessable under the head 'Short-term capital gain'. Thus, if the same facts were permeating through all the assessment years, it could not be held that on similar nature of transactions, the income from shares had to be assessed as 'Income from business', thirdly, all the transactions undertaken by the assessee were delivery based and the assessee had not undertaken any speculative or derivative trading of shares. This showed that the assessee's intention was never to indulge in trading of shares; and fourthly, no interest bearing borrowed funds or loans had been diverted for purchase of shares, rather they had been purchased from the surplus funds available with the assessee. Lastly from the details of short-term capital gain, it was seen that most of the gain had come from sale of mutual funds, which could not be traded in Stock Exchange. This also proved that the assessee was mainly an investor. Therefore, the assessee's intention mainly was to purchase the shares for holding it as investment.

Income Tax Act, 1961, Section 14

Read with Sections 2 (42B), 28 (i) & 45

In The ITAT, Mumbai E Bench

B. Ramakotaiah, A.M. & Amit Shukla, J.M.

Trinetram Consultants (P.) Ltd. v. Dy. CIT

IT Appeal Nos. 3063 & 3064 (Mum.) of 2011

A.Ys. 2006-07 & 2007-08

5 April, 2013

Appellant by : Vijay Mehta