P&H HC holds that short term selling by investment company is business income

The Hon’ble P&H HC in a recent decision 11.04.2014 has held that short term selling by investment company is nothing but business income and the same can not be held as short term capital gain. Interestingly, the ITAT as well as CIT(A) had held the same as STCG. The HC reversed the said findings by holding as under :

“It is abundantly clear that the CIT(A) as also the ITAT were wrong in adjudicating the income on sale of Tata Mutual Funds (Dividend Plan) as income from ‘short term capital gains’ merely on the ground that the units of mutual funds were not freely tradable and thus, such investment was in non-tradeable commodity. In fact, in the present case, it has been amply proved that the business of the assessee is to make profits by virtue of investments in shares and securities etc. Merely because there is single transaction or that such investment was in not freely tradeable commodity, does not change the profit intent of the assessee who is in the business of investments only. Therefore, the investment made by the assessee was rightly treated as stockin-trade and revenue generated to the tune of Rs.1,24,70,700/- was correctly assessed as business income by the AO. Rightly, no adjustment for the balance forward on account of short term capital loss of assessment year 2004-05 to the tune of Rs.1,93,776/- and for the assessment year 2005-06 to the tune of Rs.2,49,934/-, had been allowed by him.”

To read complete text of the judgement click here Pooja Investment-P&H HC

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