Case Law Details

Case Name : Pr. CIT Vs M/s Viksit Engineering Ltd. (Bombay High Court)
Appeal Number : Income Tax Appeal No. 485 of 2016
Date of Judgement/Order : 26/11/2018
Related Assessment Year : 2008-09
Courts : All High Courts (6281) Bombay High Court (1092)

Pr. CIT Vs M/s Viksit Engineering Ltd. (Bombay High Court)

Buying and selling of share in short span of time doesn’t changed character of capital gain as business income

High Court of Bombay in case of Principal Commissioner of Income-tax-II v/s Viksit Engineering Ltd vide its ITA Appeal No:485 dated 26th November 2016 has held that buying and selling of share in short span of time doesn’t changed character of capital gain as business income.

Facts of the Case:

The Respondent in its return of income claimed short term capital gain of Rs.9.42 crores. He was called upon to show cause as to why the income shown as short term capital gain should not be treated as business income. Assessee pointed out that its regular business is to trade in engineering goods, metal and other commodities. It has also made investments in shares over the last 10 to 15 years out of its own funds i.e. without any borrowings and loans. However, the Assessing Officer did not accept the same on the ground that all the scrips in respect of which the short term capital was gained as held for a very short period i.e. purchased and sold during the year.

High Court noted that the Tribunal kept in mind the tests as provided in the Circular in the context of the facts and found that these investments were out of its own funds and not borrowed funds, further it maintained a distinction between trading in shares and investments. Thus two port­folios  one for “Investment” and other for “Trading”. “Income has to be taxed as short term capital gain. Respondent holding the shares for a short period, will not convert the capital gain into business income. This would be contrary to be legislative mandate which itself provides that when the investment is held for less than 12 months, it is to be termed as short term capital gain.  Moreover, the impugned order of the Tribunal also in the present facts correctly placed reliance upon the decision of this Court

In the above facts, the view taken by the Tribunal on the facts is a possible view. Hence, the question as proposed does not give rise to any substantial question of law thus not entertained

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2 Comments

  1. vswami says:

    Random picks , for comment (:
    “…….
    Tribunal kept in mind the tests AS PROVIDED IN THE CIRCULAR ……”

    “…Moreover, the impugned order of the Tribunal also in the present facts CORRECTLY PLACED RELIANCE UPON THE DECISION OF THIS COURT.”

    “In the above facts, the view taken by the Tribunal on the facts IS A POSSIBLE VIEW. Hence, the question as proposed does NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW thus not entertained”

    (FONT to focus)

    REFER [2006]153 TAXMAN 126 (ART)
    BUSINESS INCOME
    SHARES/STOCKS – CAPITAL ASSET OR STOCK – IN -TRADE ? – A FRESH LOOK

    In the opening para. therein, are referred to,- the CBDT’s instruction No. 1827 dated 31-8-1989, then followed by a fresh circular F. No. 149/287/2005-TPL,

    Unclear reference made in the instant case is to which of the two circu;lars.
    Further, so far as seen, there is no citation given , hence not known reference made is to which ‘ decision of this court’ on which the Tribunal is said to have correctly placed reliance.

    Be that as it may, recommend to go through the detailed discussion of the subject matter, wprt interalia the legislative intent as borne out by the special definitions in the Act vide sec 2 (13) and (14) , respectively of the crucial terms ”business’ and ‘capital asset’. As stressed and substantiated more than adequaely, in that article, , the Tribunal’s view, as upheld by the HC in the instant case, might have to be agreed/ conceded, with no qualms, to be the one and only correct view ; not just a ‘possible vlew’ as opined by the HC.

    courtesy

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