DCIT Vs Kutir Navinchandra Patel (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT), Ahmedabad dismissed the Revenue’s appeal challenging the order of the Commissioner of Income Tax (Appeals) which had deleted an addition of Rs. 13.10 crore made by treating the assessee’s Short Term Capital Gain (STCG) and Long Term Capital Gain (LTCG) from sale of listed equity shares as business income. The assessee, an individual engaged in manufacturing corrugated boxes and trading in cloth through proprietary concerns, had declared STCG of Rs. 8.51 crore and exempt LTCG of Rs. 4.58 crore for Assessment Year 2017-18. During scrutiny assessment, the Assessing Officer questioned the nature of the transactions and proposed to treat the gains as business income. The assessee explained that the shares were held as investments, transactions were delivery-based, investments were reflected as such in the books, and there was no intention to undertake trading activity.
The Assessing Officer rejected the explanation mainly on the ground that unsecured loans were utilized for making investments in shares and repaid after sale of shares, which according to the Assessing Officer indicated systematic and profit-oriented business activity. Consequently, the entire amount of STCG and LTCG aggregating to Rs. 13.10 crore was assessed as business income.
