07 August 2011
I am purchasing XYZ Co's Share with delivery. I am selling this shares within 1 month. now it is called short term capital gain on shares. but i heard somewhere that if i do like this ........then this will be treated as my trading business. and this types activities i done and my turnover exceeds 60lakhs then it i have audit. so kindly clarify me about this.i know the rule of short term gain / long term gain and speculation (interaday).
07 August 2011
If a person is trading in shares frequently, generally, profit or loss will be trated as 'income / loss from business'. In such cases ,if the delivery based turn over exceeds Rs. 60 lakhs per annum, tax audit becomes mandatory since gain /loss will not be considered as short / long term capital gain / loss.
08 August 2011
Yes Mr, Warrier. I got U. Now Can You Please Provide Me Notification or reference for above. i want to convey me client about this. further , and then if i sale that shares after 1 month but within 12 month then it will be treated as STCG na???.if i sale this shares and taking delivery but selling shares within 1 month then only it will be treated as my P&L a/c.so my calculation will go in following parts. 1]speculation (interaday) 2]income from business (trading of shares )in p&L a/c. 3]STCG 4]LTCG.
08 August 2011
There are plethora of cases to support my observation. Few given here under, among others- 1. Raja Bahadur Visheshwara Singh & Ors Vs. CIT 41 ITR 685. 2. CIT Vs. Sutlej Cotton Mills Supply Agency Ltd 100 ITR 706. 3. Dalhousie International Trust Company Ltd Vs. CIT 68 ITR 486.
08 August 2011
The issue is very subjective and it depends very much upon the IT authority also.
But in my view, the methodology of 1 month holding has been prescribed by one CIT(A).
Your concern is about tax-audit, and I do not think that it will be argued by the tax authorities in the case of small assessees where total income is below 500000/-600000/- as the same is not against the interest of the revenue.
Secondly, In case of persons earning only STCG can be advised to prepare a P&L A/c and show certain business expenses like expenses. In computation these expenses will be disallowed by considering the income under the separate head of STCG.
While considering the case under the Business Income , the AO can be requested to apply his mind towards the claim of business expenses also.
Lastly, in my view, the consistency aspect is very much important. If you follow the same principles year by year, your claim about the income as STCG income can not be denied.
The Term STCG has been inserted in the statute as it is having its characteristic existence. Every STCG transaction as such can not be said to be a business transaction as the intention of assessee can easily be presented in more powerful way with the help of documentary evidences then the vague and baseless intention of the AO.
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