14 August 2008
CAN ANYONE PLEASE GIVE ME THE BASE FOR COMPUTING THE INCOME FROM THE SHARES SOLD DURING THE YEAR ( WITH IN 12 MNTHS )AS S.T.C.G OR BUSINESS INCOME SUPPORTED BY ANY CASE LAW ( IF ANY ).
14 August 2008
It is the trading pattern and the volumes generated whereby one can say that it is an adventure in the nature of trade or not. Moreover, the intention of the assessee at the time of making invesment in shares also can be a deciding factor.
Taxpayers have now been offered a choice of how they want to treat such income. Once they choose, they must however continue the same method in subsequent years too, unless there is a major change in circumstances of the case. Do note that the choice has been made applicable only to listed shares or securities.
With a view to reducing litigation in such matters, CBDT has issued the following instructions (CBDT circular no 6/2016 dated 29th February 2016)– If the taxpayer himself opts to treat his listed shares as stock-in-trade, the income shall be treated as business income. Irrespective of the period of holding of listed shares. The AO shall accept this stand chosen by the taxpayer.
If the taxpayer opts to treat the income as capital gains, the AO shall not put it to dispute. This is applicable for listed shares held for a period of more than 12 months. However, this stand once taken by a taxpayer in a particular assessment year shall be applicable in subsequent assessment years also. And the taxpayer will not be allowed to take a different stand in subsequent years.
In all other cases, the nature of transaction (whether capital gains or business income) shall continue to be decided basis the concept of ‘significant trading activity’ and the intention of the taxpayer to hold shares as ‘stock’ or as ‘investment’. The above guidance would prevent unnecessary questioning from Assessing Officers regarding the classification of income.
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