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| The Tax Publishers2020 TaxPub(DT) 2516 (Karn-HC) : (2020) 315 CTR 0336 : (2020) 272 TAXMAN 0372 INCOME TAX ACT, 1961
Section 14
Where prior to amendment of the Act, which came into force with effect from 1-4-2019, the income arising on sale of shares held as capital asset after their conversion from stock in trade was treated as capital gains, therefore, Tribunal erred in treating the income arising on sale of shares held as capital asset after conversion from stock in trade as business income.
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Head of income - Business income or capital gains - Income arising on sale of shares held as capital asset after conversion from stock in trade -
Assessee was engaged in the activity of investment in shares. The Board of the assessee passed a resolution to stop its trading activities in shares and securities under the portfolio management scheme and to convert the stock in trade into investment. The case of assessee was selected for scrutiny and notice under section 143(2) was issued. It was inter alia held that mere interchange of heads in books of accounts as investment or stock in trade does not alter the nature of transaction and transactions of assessee fall within the ambit of business income and not short-term capital gain. Thus, transactions, were treated as business income and an order of assessment was passed. Held: It was evident prior to introduction of Finance Bill, 2018 by which provisions of the Act have been amended to provide for taxability of in cases where stock in trade is converted into capital asset, there was no provision to tax the same. In absence of any provision in the Act, transaction in question could not have been subjected to tax. Prior to amendment of the Act, which came into force with effect from 1-4-2019, the income arising on sale of shares held as capital asset after their conversion from stock in trade was treated as capital gains. Therefore, Tribunal erred in treating the income arising on sale of shares held as capital asset after conversion from stock in trade as business income.
Relied:Sir Kikabhai Premchand v. CIT (Central) (1953) 24 ITR 506 (SC) : 1953 TaxPub(DT) 0121 (SC) Principal CIT v. Pavitra Commercial Ltd. (2018) 402 ITR 66 (Del-HC) : 2018 TaxPub(DT) 0778 (Del-HC) CIT v. M/s. Essorpe Holdings Pvt. Ltd. (2017) 83 taxmann.com 280 (Mad-HC) : 2017 TaxPub(DT) 2003 (Mad-HC) Deeplok Financial Services Ltd. v. CIT (2017) 393 ITR 395 (Cal-HC) : 2017 TaxPub(DT) 0753 (Cal-HC) CIT & Anr. v. Bagmane Developers P. Ltd. & (Vice Versa) (2017) 392 ITR 379 (Kar-HC) : 2017 TaxPub(DT) 0790 (Karn-HC) Aditya Medisales Ltd. v. Dy. CIT (2016) 242 Taxman 228 (Guj-HC) : 2016 TaxPub(DT) 4172 (Guj-HC) CIT v. M/s. Abhinandan Investment Ltd. (2015) 63 taxmann.com 263 (Delhi-HC) : 2015 TaxPub(DT) 4893 (Del-HC) CIT (Central) v. M/s Express Securities Pvt. Ltd. [Income Tax Appeal No. 406/2013 & CM No. 12622/2013, dt. 22-10-2013] : 2014 TaxPub(DT) 2479 (Del-HC) CIT v. Yatish Trading Co. Pvt. Ltd. [I.T.A. No. 1007 of 2011, dt. 28-1-2013] : 2013 TaxPub(DT) 2801 (Bom-HC) CIT v. Jannhavi Investments P. Ltd. (2008) 304 ITR 276 (Bom-HC) : 2008 TaxPub(DT) 1444 (Bom-HC) CIT v. Vishwanath (1993) 201 ITR 920 (All-HC) : 1993 TaxPub(DT) 0428 (All-HC) CIT v. Surajbhan Om Prakash 1986 TaxPub(DT) 0805 (Raj-HC) M. Venkatesan v. CIT (1983) 144 ITR 886 (Mad-HC) : 1983 TaxPub(DT) 0299 (Mad-HC) CIT v. Dhanuka & Sons (1980) 124 ITR 24 (Cal-HC) : 1980 TaxPub(DT) 0449 (Cal-HC) Ranchhodbhai Bhaijibhai Patel v. CIT (1971) 81 ITR 446 (Guj-HC) : 1971 TaxPub(DT) 0218 (Guj-HC)
REFERRED :
FAVOUR : In assessee's favour
A.Y. : 2005-06
IN THE KARNATAKA HIGH COURT
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