Case Law Details
This article deal with the issue of Long Term Capital Gain on Sale of Small Company Shares or on Penny Stocks. Article is based on ITAT Kolkata order in the case of Surya Prakash Toshniwal VS. ITO in which it held that Long-term capital gains claimed exempt u/s 10(38) cannot be treated as bogus unexplained income if the paper work is in order. It further held fact that the Company whose shares were sold has violated SEBI norms and is not traceable does not mean that the assessee is at fault.
Briefly, the facts are that the assessee in the present case is a Hindu Un-divided Family (HUF) and derived his income from trading in shares and securities. The assessee is engaged in sales-purchase of securities and earned income thereon was offered to tax under the head “capital gains”. However, AO treated the income from the sale-purchase of securities as “business income” on account of following reasons:-
i) The dividend income in the year under consideration is negligible;
ii) Frequency for sale-purchase and magnitude of transactions reflects activities of assessee as in the nature of business;
iii) The manner in which transactions for sale-purchase was recorded in the books of account was sufficient to justify the same as business transactions.
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