Case Law Details
The income arising on account of sale -purchase of shares if assessed under the head of capital would of course be taxable at relatively lower rate of tax and is also exempt in some cases, as compared to the business income which is taxable at relatively higher rate of tax. But, if such income is assessable under the head income from business then the assessee would be entitled for claim of set of expenses incurred in the normal course of business to earn such income and the tax would be payable only on the amount of net profit. Therefore, while drafting the provisions the legislature did not make any water tight rule for determination of nature of income arising from purchase and sale of shares to be assessed under the head of capital gains or business income. It has been left upon the wisdom of the assessee and facts and circumstances of the case. Under these circumstances, if assessee has chosen a particular course after deciding all the pros and cons of both the options available to it and if the choice has been exercised in a bonafide manner, the Board has advised as discussed above that the AO does not have liberty under the law to thrust his opinion upon the assessee, so long as the assessee follows his choice on consistent basis.
It is apparent that the assessee had adopted a particular course. He explicitly categorised the amount invested in shares as part of ‘investments’ and not as part of ‘stock-in-trade’. In our considered opinion, AO’s allegation that assessee did not make ‘investment’ into shares but carried it out as business activity merely relying upon factors like volume or frequency of transactions alone, was not in accordance with law and facts of this case.
EXTRACT OF THE JUDGMENT
These appeals pertain to same assessee for the two different years involving identical issues, therefore, these were heard together and being disposed of by this common order:
2. During the course of hearing, arguments were made by Shri Jitendra Jain, Authorised Representatives (AR) on behalf of the Assessee and by Shri TA Khan, Departmental Representative (DR) on behalf of the Revenue.
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