×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
1. Aforesaid appeals by assessee for Assessment Years [AY] 2011- 12 & 2012-13 contest separate orders of first appellate authority. Both the appeals are being disposed-off by way of this combined order for the sake of convenience & brevity. First we take up ITA No.2585/Mum/2016 for AY 2011-12 which assails the order of the Ld. Commissioner of Income-Tax (Appeals)-9 [CIT(A)], Mumbai, Appeal No.CIT(A)- 9/Cir.4/343/2013-14 dated 28/01/2016 by raising the following grounds of appeal:-
1. Commissioner of I.T.(A) erred in confirming the treatment of Short Term Capital Gain earned by appel ant as business income without appreciating arguments of appellant and ignoring fact that scripts in which capital gain is earned are acquired from IPO (Public issue) and assessee has not traded in same scripts.
2. Commissioner of I.T (A) erred in confirming the treatment of Short Term Capital Gain earned by appellant as business income by making reliance on holding period of shares allotted/acquired from IPO (Public issue) and assessee has not traded in same scripts.
3. The Appellant plead before Honorable ITAT to direct the Assessing Officer to:-
(i) To allow the claim of the appellant that income from sale of shares allotted in IPO be treated as the capital gain as returned and not to treat same as business income.
(ii) To allow appropriate relief on the ground of appeal raised before Hon’ble Tribunal.
4. The Appellant plead before Honorable ITAT to add, alter or amend any or all grounds of appeal before or at the time of hearing. The assessment for impugned AY was framed by Ld. Assistant Commissioner of Income Tax, Circle-4(2), Mumbai [AO] u/s 143(3) of the Income Tax Act, 1961 on 10/02/2014 wherein the income of the assessee has been assessed at Rs.604.52 Lacs after certain disallowances & adjustments as against returned income of Rs.594.49 Lacs e-filed by the assessee on 16/09/2011.
2.1 During impugned AY, the assessee being resident corporate entity was engaged in the business of financial service sector and as Share Brokers, sub brokers. As evident from the grounds of appeal, the sole subject matter of the appeal is determination of head under which gains earned by the assessee on sale of certain shares / securities would be assessable to tax.
2.2 During assessment proceedings, it was noted that the assessee earned Short Term Capital Gains of Rs.116.16 Lacs against sale of certain shares, the details of which has been extracted at para-6.2 of the quantum assessment order. The assessee defended the same vide its letter dated 05/02/2014 wherein it inter-alia submitted that the shares were allotted in public issues and investments were out of own capital. However, Ld. AO noted that the assessee traded in 11 scrips / transactions during the year out of which the holding period of 10 transactions was less than five days. Placing reliance on several judicial pronouncements, Ld. AO came to a conclusion that the aforesaid income was assessable has business income instead of Short Term Capital Gains as offered by the assessee. The head of the income assumes importance in view of the fact that Short Term Capital Gains on sale of shares assessable under the head capital gains attracts concessional rate of tax as against the rate when the same are treated as Business Income.
3. Aggrieved, the assessee contested the same without any success before Ld. first appellate authority vide impugned order dated 28/01/2016 wherein Ld. CIT(A) came to conclusion that the assessee was engaged more as a trader rather than an investor in shares since the frequency of the transactions was high and the holding period of scrips was very less and therefore, Ld. AO was justified in treating the gains as Business Income. Aggrieved, the assessee is in further appeal before us.
4. The Ld. Authorized Representative for assessee [AR] contested the stand of lower authorities on the premise that the assessee acquired the scrips by way of Initial Public Offers [IPO] out of surplus funds and the same were held as investment and therefore the gains were rightly offered under the head Capital Gains. Pe Contra, Ld. DR drew our attention to the fact that the holding period of the scrip was very less and therefore, the stand of lower authorities was justified.
5.1 We have carefully heard the rival submissions and perused relevant material on record The basic facts are not under dispute and the issue before us is in a very narrow compass i.e. whether the factual matrix justifies the gains to be assessed as Capital Gains or as a Business Income.
5.2 The perusal of holding period chart extracted by Ld. AO at para-6.2 clearly reveal that the assessee has dealt in 11 scrips / transactions during the year out of which the holding period of 10 scrips / transactions is five or less than five days which indicate that the investments were made by the assessee as a trader only and not as an investor and the primary objective of the investments was to earn the gains in a businesslike manner rather than to earn accretion to the same by way of dividend. The intention of the assessee gets manifested from the fact that the scrips have been sold within a very short span of time so as to reap the