In Principal CIT v. M.B. Finmart Pvt Ltd, the division bench of the Delhi High Court has held that the income from trading in shares/mutual funds must be treated as ‘Capital Gain’ if the Revenue has been treating the same as investment in the past years.
Before the High Court, the department challenged the order of the first appellate authority and the Appellate Tribunal contending that trading in shares/mutual funds should be treated as capital gains.
They contended that considering the consistent treatment of the above transactions in the books of accounts of the Assessee and the volume and frequency of such transactions would show that the said
income is taxable as business income.
The bench noticed the specific finding of the Tribunal that “from the details of purchase and sale and period of holding of shares, it is observed that the assessee has held 11 transactions of shares for more than 50 days and the balance were held for more than 100 days in total number of 30 transactions. In the previous year and the subsequent years relevant to the Assessment Year under consideration the Department has been consistently accepting the investment in shares held by the assessee. During the year under consideration, the assessee has sold shares of two companies being Hindustan Construction and GMR Infra Structure. The remaining shares relate to purchases made in the previous years.”
Dismissing the appeal, the division bench comprising of Justice S. Muralidhar and Justice Anil Kumar Chawla upheld the view taken by the Appellate Tribunal that the Department has been consistently accepting the investment in shares held by the assessee for the earlier assessment years.
Before the High Court, the department challenged the order of the first appellate authority and the Appellate Tribunal contending that trading in shares/mutual funds should be treated as capital gains.
They contended that considering the consistent treatment of the above transactions in the books of accounts of the Assessee and the volume and frequency of such transactions would show that the said
income is taxable as business income.
The bench noticed the specific finding of the Tribunal that “from the details of purchase and sale and period of holding of shares, it is observed that the assessee has held 11 transactions of shares for more than 50 days and the balance were held for more than 100 days in total number of 30 transactions. In the previous year and the subsequent years relevant to the Assessment Year under consideration the Department has been consistently accepting the investment in shares held by the assessee. During the year under consideration, the assessee has sold shares of two companies being Hindustan Construction and GMR Infra Structure. The remaining shares relate to purchases made in the previous years.”
Dismissing the appeal, the division bench comprising of Justice S. Muralidhar and Justice Anil Kumar Chawla upheld the view taken by the Appellate Tribunal that the Department has been consistently accepting the investment in shares held by the assessee for the earlier assessment years.
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