Ita/921/2009 Of The Commissioner Of Income Tax v. Deepak Iswarlal

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN MONDAY, THE 25TH JANUARY 2010 / 5TH MAGHA 1931 ITA.No. 921 of 2009() --------------------- ITA.614/2004 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT ----------------------------- THE COMMISSIONER OF INCOME TAX COCHIN. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): --------------- DEEPAK WSHWARLAL L/H.OF LATE SRI. ISHWARLAL M.SHAH ISHWARLAL & CO., D.H.ROAD, ERNAKULAM. ADV. SRI.JOSEPH KODIANTHARA FOR R1 SRI.TERRY V.JAMES FOR R1 THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 25/01/2010, ALONG WITH ITA NO.996 OF 2009, & ITA NO.1077 OF 2009, THE COURT ON 25/01/2010 DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &P.S.GOPINATHAN, JJ. ....................................................................I.T. Appeal Nos.921, 996 & 1077 of 2009 ....................................................................Dated this the 25th day of January, 2010. JUDGMENT Ramachandran Nair, J. The only question raised in the connected appeals filed by theRevenue is whether the income received in purchase and sale of sharesby the respondent-assessee is to be treated as long term capital gain oras business income. We have heard Standing Counsel appearing forthe appellant and Senior Counsel Sri.Joseph Markose appearing for therespondent-assessee. 2. After hearing both sides and after going through the orders ofthe Tribunal, we notice that respondent was mainly engaged in tradingin goods and he was also investing in shares. It was found by theTribunal that assessee showed the shares' purchase as investments inthe Balance Sheet. The further finding of the Tribunal is that most ofthe shares purchased were sold within two to three years. Thecontention of the assessee is that shares held as investment and sold after 12 months should be treated as long term capital asset.However, for shares purchased and sold within 12 months, assessee hasreturned income as short term capital gains. We do not find anyground to interfere with the Tribunal's order because an assesseeengaged in trading in shares or in other words in speculation businessin shares, is also free to invest on long term basis in shares and so longas shares are held as investment, the income therefrom on sale after 12months of holding has to be treated as long term capital gains and theTribunal rightly held so. However, we make it clear that profit returnedon sale of shares within one year of purchase should be treated asshort term capital gain. The Assessing Officer will make modificationin the assessment in respect of short term capital gains. For periodprior to introduction of specific charging provision for short termcapital gains, Section 111A of the Income Tax Act, the short term capital gain should be assessed as business income. The appeals aredismissed but with the above finding on short term capital gains. C.N.RAMACHANDRAN NAIRJudge pms P.S.GOPINATHANJudge