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2018 (4) TMI 78 - AT - Income TaxTreatment to gain on sale of shares - busniss income or capital gain - ‘initial intention’ of the assessee to decide whether an activity amounts to ‘trading activity’ or ‘investment activity’ - conversion of investment into stock-in-trade - Held that:- We note that the sources for acquisition of shares are from share capital, reserves and surplus funds. The assessee has been an investor and not a trader as seen from the intention of the assessee. The treatment given in the books under the head ‘investment’ clearly shows that the assessee’s intention to deal in shares as investment. The conversion of investment into stock-in-trade and continuing the trading under that head and again converting the closing stock under that head into ‘investment’, under consideration amounts to a clear change of intention depending on the circumstances. By converting the stock-in-trade into investment, it does not alter the character, nature and intention of that particular transaction especially in the context of capital gain versus business income. Subsequent conversion and treatment given in the books of accounts do not alter the character of commercial transaction. The profit that has been attributable to this trading activity corresponding to conversion of stock-in-trade into investment is to be treated as ‘business income’ and accordingly to be taxed. In view of the above findings of CIT(A) that the income from investment is to be taken as ‘capital gains’ and conversion of stock-in-trade to investment is to be taken as ‘trading income’, which is based on facts of the case and need no disturbance. - Decided against revenue.
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