CIT II Vs First Choice Professional Services Private Limited (Madras High Court)
Madras High Court held that income from sale of shares is to be treated as business income since money was borrowed and invested in shares only for the purpose of trading in shares. Accordingly, income from sale of shares cannot be treated as short-term capital gain.
Facts- The substantial question involved herein is whether the Tribunal was right in holding that the profit from sale of shares as short term capital gain when the assesses has purchased shares out of borrowed capital for the purpose of trading in shares in order to make profit out of it, which is a business income assessable under Section 28 of the Income Tax Act?
Conclusion- Held that that the money that was borrowed was only for the purpose of trading in it .Ordinarily, investment in shares are expected to be made only if surplus amounts was available in the hands of the respondent- assesses Company from its business. Whereas, in the present case, amounts were borrowed and were invested in the shares of M/s. Shriram Transport Finance Corporation Limited. Therefore, investment in the shares of M/s. Shriram Transport Finance Corporation Limited by the respondent-assesses Company out of the borrowed capital of 104,10,00,000/- was to be treated as a business venture for trading in shares. The income from sale of shares by the respondent-assesses Company could not be claimed as income from short- term capital gains under Section 111A of the Income Tax Act, 1961. It has to be treated as income from business of the respondent-assesses Company although the main object for which the respondent-assesses Company was incorporated was for consultancy service.
