Smt. Prem Jain Vs. ITO (ITAT Delhi)
It is an undisputed fact that the Assessing Officer has not disbelieved the purchase and sale of shares on the basis of the various documents filed before him since ultimately he has treated the profit from sale of shares as short term capital gain. His grievance is that the assessee has manipulated the so-called shares and so-called transaction of shares of one private company is just to claim the deduction u/s 35 of the I.T. Act on the donation of Rs.31,00,000/-. The donation has also not been disbelieved. Under these circumstances, we have to consider as to whether the profit on sale of such shares will constitute an adventure in nature of trade as claimed by the assessee or short term capital gain as treated by the Assessing Officer and upheld by the ld. CIT(A).
Hon’ble Delhi High Court in the case of D & M Components Ltd. (supra) while deciding a somewhat identical issue has held that where there was short duration of holding of shares and lack of clarity in account books, sale and purchase of shares would lead to business income and not short term capital gains. The various other decisions relied by the ld. counsel for the assessee also supports his case that the profits in the instant case of purchase and sale of shares would amount to business income and not short term capital gain as held by the Assessing Officer. In this view of the matter, we set-aside the order of the ld. CIT(A) and direct the Assessing Officer to allow the claim of business income on account of profit on sale of such shares. Since the assessee succeeds on this issue, the claim of the assessee regarding the deduction u/s 35 of the I.T. Act is also allowed subject to verification of other conditions if any by the Assessing Officer.
