Capital Gain from shares cannot be treated as Business Income merely for low cost of acquisition

JCIT Vs United Spirits Limited (ITAT Bangalore)

It is not in dispute that the shares of M/s. Lee Edges were purchased by the assessee in the Financial Year 2003-04 and those of M/s. Shaw Wallace Breveries Ltd., were purchased in the Financial Year 2001-02 were unlisted shares. These shares were sold in Financial Year 2004-05. These shares were held for more than 12 months in both the cases. The admitted position with regard to treatment in the books of accounts is that the shares have been treated as investment and not as stock-in-trade. In the light of the CBDT’s Circulars referred to above which are in modification of Circular No. 4/2007 dated 15.06.2007, we are of the view that the CIT(A) was justified in coming to the conclusion that the gain on sale of shares has to be regarded as LTCG. As already observed, the only reason given by the AO for coming to the conclusion that income on sale of shares has to be regarded as business income is due to the fact that the cost of acquisition of the shares was less and the sale proceeds of those shares were very high and therefore the gain in question should be regarded as income from business. This approach of the AO is contrary to the tests laid down in the several Circulars in particular Circular No. 4/2007. In the light of the subsequent Circulars pointed out above, we are of the view that the income on sale of shares has to be regarded as LTCG. We therefore uphold the order of CIT(A). In view of the above conclusion in the appeal of the Revenue, we are of the view that no adjudication is necessary in so far as the C.O. filed by the assessee is concerned. Accordingly, the same is dismissed.

FULL TEXT OF THE ITAT JUDGEMENT

ITA No.1923/Bang/2018 is an appeal by the Revenue against the order dated 12.03.2018of CIT(A)-10, Bengaluru, relating to Assessment Year 2005-06. The assessee has filed C.O. against the very same order of CIT(A).

2. Shaw-Wallace Financial Services Ltd., (SWFSL), Kolkata, was a company engaged in the business of financing and investments. For Assessment Year 2005­06, return of income in the name of SWFSL was filed on 31.10.2005 at Income Tax Office Kolkata returning a total income of Rs.16,67,62,650/-. The break up of the total income as per the return of income was as follows:

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