2013 (12) TMI 418 - HC - Income Tax

Transactions to be treated as Capital Gains or business income - Held that - The delivery based transactions were made with an investment motive and as such the income therefrom was in the nature of short-term capital gains whereas the income from F & O transactions and daily trading in shares were with the business motive which were showed as business income only - As per the Board Circular No. 4 of 2007 issued on June 15 2007 - It is possible for a taxpayer to have two portfolios namely an investment portfolio comprising the securities which are to be treated as capital assets and trading portfolio comprising stock-in-trade which are to be treated as trade asset - No single principle would be decisive and the total proposition is to be considered - Decided against Revenue.

Summary

Issues:
Challenge to order of Income-tax Appellate Tribunal regarding nature of income from transactions.

Analysis:
The High Court heard the appeal filed by the Revenue challenging the order of the Income-tax Appellate Tribunal regarding the nature of income from transactions for the assessment year 2005-06. The Commissioner of Income-tax (Appeals) and the Tribunal both concluded that delivery-based transactions were made with an investment motive, resulting in short-term capital gains. On the other hand, income from F & O transactions and daily trading in shares was considered to be with a business motive and treated as business income. The authorities referred to Board Circular No. 4 of 2007, emphasizing the possibility of a taxpayer having two portfolios - an investment portfolio and a trading portfolio. The clarification highlighted that no single principle would be decisive, and the overall proposition should be considered. It was noted that the respondent-assessee had maintained only a trade portfolio but claimed it to be an investment portfolio, with a holding period of less than one year. Consequently, both the Commissioner of Income-tax (Appeals) and the Tribunal held that the transactions should be treated as short-term capital gains.

The High Court, after considering the findings of fact by the Commissioner of Income-tax (Appeals) and affirmed by the Tribunal, found no grounds or substantial question of law to interfere in the matter. Therefore, the appeal was dismissed.