Taxation of STCG as Business Income by ITO

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This query is : Resolved

Abhinay Rastogi (Querist)

08 December 2007 A Company which has its core business as manufacturing of industrial equipments, had some excess
funds during some part of the year which it deployed in Mutual Funds and earned handsome returns
therein. Same were shown as STCG and tax was paid accordingly. However, ITO has claimed that the
same should be treated as business income and tax should be paid accordingly. Is there any case
law/section to support assessee's intention of getting the gains taxed as STCG?

R.V.RAO

R.V.RAO (Expert)

08 December 2007 SECTION 111A SAYS THAT STCG IS TAXABLE AT 10%,(PLUS CESS ETC..) IF STT IS PAID AND THE TRANSACTION TAKES PLACE AFTER 01-10-04 AND THE STCG IS ON TRSFR. OF EQUITY SHARES AND UNITS IN EQUITY ORIENTED MUTUAL FUNDS
(PL. CHECK ON THIS PARTICULAR ASPECT OF M.F)
AS THE CORE BUSINESS OF THE COMPANY IS MANUFACTURE OF IND, EQUIP.,YOUR AUTHORISED TAX REP. CAN EXPLAIN THESE ABOVE FACTS AND YOUR CASE IS SUPPORTED BY SEC 111 A ON COMPLYING ABOVE CONDITIONS.
IT CANNOT BE BUSINESS INCOME AS THE CORE BUSINESS IS NOT CASH BASED OR DELIVERY BASED SHARE TRANSACTIONS IN WHICH CASE SUCH GAINS ARE TAXED UNDER SPECULATIVE BUSINESS.
DERIVATIVE TRANSACTIONS ARE NOT SPECULATIVE BUSINESS UNDER SEC 43(CLAUSE d of sub sec 5 ).
R.V.RAO

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