Long term capital gain earned from investment in shares is to be treated as LTCG only and not business income
High Court of Bombay in case of Pr. Commissioner of Income Tax- 17, v/s Hardik Bharat Patel vide its ITA. 390 OF 2016 has held that Long term capital gain earned from investment in shares is to be treated as LTCG only and not business income by following CBDT’s Circular.
High Court while deciding the matter has observe as under :-
Our attention is drawn to Circular No. 6 of 2016 dated 29.2.2016 issued by the Central Board of Direct Taxes (CBDT). This circular issued with regard to the issue of taxability of surplus on sale of shares and securities whether as capital gain or business income in case of long term holdings of shares and securities i.e in excess of 12 months. It has clarified therein that with a view to reduce litigation and uncertainty in the matter of taxibility, as long term capital gains or business income – the assess has an option to treat the income from sale of listed shares and securities as income arising under the head ‘Long Term Capital Gains’, them the same shall be accepted by the assessing officer.
Further, Court has observed that the circular makes no distinction whether the investments made in shares were out of borrowed funds or out of its own funds. Thus, the distinction which has been sought to be made by the Revenue cannot override the above CBDT Circular, which is binding upon it.
Following the CBDT circular court has rejected the application file by the department and accepted assessee contention to that profit earn from investment held for morethan 12 months is to be treated as LTCG desite of borrowed fund.