The Income Tax Appellate Tribunal (ITAT), Pune bench has held that the income from share transactions shall be treated as business income under the provisions of the Income Tax Act, 1961 since the assessee had claimed the same under the similar head during the previous years.
The assessee, Mangesh Krishnath Ekbote, is engaged in the business of Software Management consultancy and trading in Futures and Options (F&O). A return was filed declaring total income of Rs.1.23 crore. During the course of assessment proceedings, the Assessing Officer (AO) treated the profit on sale and purchase of shares amounting to Rs.34,62,194/- as ‘Business income’. The AO observed that the assessee had shown short term capital gain of Rs.34,62,194/-. On being called upon to justify the amount of capital gain, the assessee did not furnish any explanation, which led to the passing of the assessment order u/s.144 of the Act.
A division bench of the Tribunal comprising Shri R.S. Syal, Vice President and Shri S.S. Viswanethra Ravi, Judicial Member has held that the assessee had shown shares as `Investment’ in its balance sheet as at the end of the year with a nominal balance.
Granting relief to the assesee, the Tribunal held that “the shares purchased and sold during the year indicate that these were held for a very short time before their sale. On a pertinent query, the ld. AR admitted that income from sale and purchase of shares was treated as ‘Business income’ by the assessee in the immediately preceding assessment year. The ld. CIT(A) has also recorded that the assessee offered such income ‘Business income’ in the subsequent year as well, which fact has not been controverted on behalf of the assessee. Since the income from purchase and sale of shares has been treated by the assessee as `Business income’ in the immediately preceding and subsequent assessment years and further nothing has been shown, except their depiction in the balance sheet as Investment, as to how, the shares were so Having heard the rival submissions and gone through the relevant material on record, it is seen as an admitted position that the assessee had shown shares as `Investment’ in its balance sheet as at the end of the year with a nominal balance. The shares purchased and sold during the year indicate that these were held for a very short time before their sale. On a pertinent query, the ld. AR admitted that income from sale and purchase of shares was treated as ‘Business income’ by the assessee in the immediately preceding assessment year.”
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