Case Law Details
CIT Vs Century Plyboards (I) Ltd. (Calcutta High Court)
Calcutta High Court held that for earlier assessment years already tax in respect of sale of shares was treated and accepted as long term capital gains. Thus, when the shares were held to be investments and accepted as earlier AYs, it cannot be said to be not an investment in the current AY. Accordingly, profit taxable as capital gains and not business income.
Facts- In this appeal we are concerned with only one issue namely, whether the profit of 4,33,09,144/- should be treated as long-term capital gains or business profit.
AO pointed out that the assessee has shown long-term and short-term capital gains from sale and purchase of shares and units of mutual funds. AO issued show-cause notice to justify as to why the profit of the sale of shares/ units be treated as business profit.
In the show-cause notice it was stated that looking at the frequency of the transactions it is prima facie clear that the assessee was transacting in shares as a business and they were required to justify as to why the investment should not be assessed under the head “income from business” instead of capital gains as has been shown by them. The assessee in their reply contended that the investment transactions were shown in the books of accounts under the head “investments” and they had invested idle funds within the limit prescribed u/s. 372A of the Companies Acct, 1956 and the investments were with a long-term view which is evident from the fact that during the financial year in question the assessee has earned Rs. 406.51 lakhs as capital gain from investment activities out of which Rs. 432.09 lakhs was long-term capital gain. Further, the assessee stated that during the financial year under consideration they had made only a few investment transactions compared to several other normal business activities such as trading of plywood and other products etc. Therefore, the assessee requested that the investments should be assessed under the head “capital gain”.
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