Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: empanelment :: articles on VAT and GST in India :: Central Excise rule to resale the machines to a new company :: ACCOUNTING STANDARDS :: VAT Audit :: TDS :: VAT RATES :: ACCOUNTING STANDARD :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: due date for vat payment :: list of goods taxed at 4% :: cpt :: ARTICLES ON INPUT TAX CREDIT IN VAT :: form 3cd :: TAX RATES - GOODS TAXABLE @ 4%
« From the Courts »
 Ravneet Takhar Vs. Commissioner Of Income Tax Ix And Ors.
 Jaiprakash Associates Ltd. Vs. Commissioner Of Income Tax
 Formula One World Championship Limited Vs. Commissioner Of Income Tax, International Taxation-3 And Anr.
 Commissioner Of Income Tax International Taxation-3 Delhi Vs. Formula One World Championship Ltd. And Anr.
 Reliance Communications Ltd vs. DDIT (ITAT Mumbai)
  Sushila Devi vs. CIT (Delhi High Court)
 Ashok Prapann Sharma vs. CIT (Supreme Court)a
  Vatsala Shenoy vs. JCIT (Supreme Court)
  Vatsala Shenoy vs. JCIT (Supreme Court)
 M.K.Overseas Pvt. Ltd. Vs. Pr.Commissioner Of Income Tax-06
 Arshia Ahmed Qureshi Vs. Pr. Commissioner Of Income Tax-21

'Capital gains on share sales not biz income'
January, 19th 2010

Capital gains on sale of shares treated as investment income in earlier years cant be treated as business income in subsequent years if there is no change in the facts and circumstances in the case of the assessee. This was the gist of a recent Bombay High Court order dismissing an appeal against a tribunal order in the case of Commissioner of Income Tax versus assessee Gopal Purohit.

This order will clear many pending cases where the assessing officers and CIT appeals have held investors as traders, and therefore the concessional amended rates of 10% in the case of short-term capital gains and 0% for long-term capital gains will be available to investors, said chartered accountant Bhupendra Shah.

Short-term capital gains tax is levied at 10% on sale of shares that have been held for less than one year, while there is no tax on gains if the shares have been held for more than one year. In the case of trading of shares without taking delivery, the gains are added to the regular income and taxed at 33.99%.

The assessee undertook two kinds of transactions in the capital market, that of dealing in shares, ie, buying and selling without taking delivery, and the other which consisted in taking delivery of or investing in shares. The income from investment activity was offered as capital gains, while the income from dealing activity was offered as business income.

This position was accepted by the assessing officer in earlier years. However, in the assessment year 2005-06, the AO took a different view and held that shares even on the investment account had to be assessed as business income.

The assessee appealed against the assessing officers decision before the Income Tax Appellate Tribunal (Mumbai), a quasi judicial body on tax-related issues, which passed an order in favour of the former. The revenue department then appealed against the ITAT order in the HC, which dismissed the appeal and upheld the tribunals order.

The HC held that the tribunal was right in accepting the position that it was open to an assessee to maintain two separate portfolios, one relating to investment in shares and another relating to business activity or buying and selling of shares without taking/giving delivery. Delivery-based transactions were correctly treated as being in the nature of investment transactions that give rise to capital gains.

The tribunal also rightly held that since the assessee had followed a consistent practice of keeping records and presenting shares as investment at the end of the year in all the years, there was no justification for a different view being taken by the AO, the HC noted. Furthermore, the tribunal held that while entries on books of account alone were not conclusive in determining the nature of income (investment or business), it did have a bearing.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Careers

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions