CIT Vs. OM PRAKASH ARORA

JUDGEMENT

(1.) IN this appeal, the revenue contends that the Tribunal (hereafter "ITAT") fell into error in holding that the amount originally brought to tax as business income of the assessee, was short term capital gains as claimed in the returns filed. The following question of law arises in the appeal:

(2.) THE assessee in this case is an individual; in the income tax returns, he reported a net taxable income of Rs.9,34,80,539/ -. The returned income comprised of the income derived by him from his business of trading in books in the name and style of M/s Variety Book Depot as also income derived by the assessee in his individual capacity from house property, income from other sources as well as short term capital gains. The assessee continued to derive income from similar sources as was done by him inthe earlier years. Its assessment was completed by order under Section 143(3) of the Act on 31.11.09 at an assessed income of Rs.8,51 ,72,074/ - inter alia treating the income from short term capital gains amounting to Rs.8,78, 16,545/ - earned bj· the assessee as business income. The Assessing ·officer held that 10% of the amount of Rs.8, 78,16,545/ - earned by the assessee as short term capital gains is "being expenses relating to the business" and in this manner made an addition of Rs.7,90,34,891/ - as business income of the assessee on account of shares as against the amount of Rs.8,78,16,545/ - declared as income from short term capital gains.

(3.) IT is argued by the revenue that having regard to the settled law, which mandates that all relevant criteria have to be taken note of while deciding if any amount claimed as capital gains, is in fact that or business income, the CIT (A) and ITAT fell into error in application of those tests to the facts of this case. It was argued that during the Assessment Year, the gross total income reported was Rs.9,35,80.539/ -, which consists of STCG of Rs.8,78,16,545/ -. It was argued that transactions in shares do not constitute peripheral activity but the main activity of the assessee. He is carrying on the business as proprietor of M/s Variety Book Depot, the profit from which was only Rs.39,34,648/ - This amount was less than 20% of the STCG. The computation of total income for assessment year 2005 -06, especially the computation showed gross total income of Rs.2,17,26,901/ - and this amount inter alia includes profit from M/s Variety Book Deport of Rs.3,42,146/ - and Rs.2,01,51,090/ -. Thus, in that year also the substantial STCG of activity of the assessee was in respect of share transactions. A similar position existed in assessment year 2006 -07, in which business profits from M/s Variety Book Depot amounted to Rs.40,33,907/ - and STCG Rs.2,32,33,691/ -. amounted to Thus, the assessee has been systematically indulging in share transactions leading to substantial profits year after year. The revenue also urged that the amounts used for deriving the income, were obtained from the assessee's other business, which clearly reflected the intention to trade in shares.