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2010 (3) TMI 1129 - ITAT MUMBAINature of income - Income from sale of shares - “income from business or profession” or Short Term Capital Gain - activity of earning profits through purchase and sale of shares - frequency of transactions - AO held that the entire profits arising from this activity should be assessed under the head “income from business or profession” and not as short term capital gains as claimed by the assessee - As pointed out that the assessee did not borrow monies for the purpose of acquiring shares and this is sufficient indication that the shares were held only as investment and not as stock-in-trade - CIT(A) endorsed the decision of AO that the gains on the sale of shares should be assessed as business income subject to the normal rates of tax and not as short term capital gain assessable to concessional rate of tax of 10% under the provisions of section 111A. HELD THAT:- We uphold the conclusion of the departmental authorities that the sale of shares must be treated as business transactions and that the profits must be assessed as business profits and not as short term capital gains. However, the securities transaction tax paid by the assessee is allowable as a deduction under section 88E, while computing the business profits. AO is directed to ascertain the details of the payment, if any, and allow the same as a deduction. Similarly, the AO is also directed to examine and take an appropriate decision vis-a-vis the assessee’s plea that the AO ought to have considered the stock on hand also, instead of taking into account only the shares which were sold, consistent with his view that the assessee is carrying on business in shares. The assessee shall be given sufficient opportunity to adduce evidence in support of this alternative plea which shall be considered by the Assessing Officer before taking a decision on this alternative plea. Thus, the first six grounds are partly allowed. Computation of the total income - adjustment of the future and option loss while computing the total income - whether loss suffered in trading derivatives cannot be considered as speculative loss? - HELD THAT:- In the Special Bench case of Shree Capital Services Ltd. Vs. ACIT.[2009 (7) TMI 172 - ITAT CALCUTTA] it was held that clause (d) of section 43(5) is prospective in nature and will be applicable to AY 2006-07 onwards. This appeal relates to the AY 2005-06. The Special Bench decision is therefore in favour of the revenue. The loss in futures and options will therefore be speculation loss for the year under appeal and can be adjusted only against speculation profit which the assessee claims to have included in the total income. The AO is directed to verify the claim and allow relief if the claim is found correct. The grounds are allowed. Appeal is partly allowed.
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