IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN MONDAY, THE 25TH JANUARY 2010 / 5TH MAGHA 1931 ITA.No. 921 of 2009() --------------------- ITA.614/2004 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT ----------------------------- THE COMMISSIONER OF INCOME TAX COCHIN. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): --------------- DEEPAK WSHWARLAL L/H.OF LATE SRI. ISHWARLAL M.SHAH ISHWARLAL & CO., D.H.ROAD, ERNAKULAM. ADV. SRI.JOSEPH KODIANTHARA FOR R1 SRI.TERRY V.JAMES FOR R1 THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 25/01/2010, ALONG WITH ITA NO.996 OF 2009, & ITA NO.1077 OF 2009, THE COURT ON 25/01/2010 DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & P.S.GOPINATHAN, JJ. .................................................................... I.T. Appeal Nos.921, 996 & 1077 of 2009 .................................................................... Dated this the 25th day of January, 2010. JUDGMENT Ramachandran Nair, J. The only question raised in the connected appeals filed by the Revenue is whether the income received in purchase and sale of shares by the respondent-assessee is to be treated as long term capital gain or as business income. We have heard Standing Counsel appearing for the appellant and Senior Counsel Sri.Joseph Markose appearing for the respondent-assessee. 2. After hearing both sides and after going through the orders of the Tribunal, we notice that respondent was mainly engaged in trading in goods and he was also investing in shares. It was found by the Tribunal that assessee showed the shares' purchase as investments in the Balance Sheet. The further finding of the Tribunal is that most of the shares purchased were sold within two to three years. The contention of the assessee is that shares held as investment and sold 2 after 12 months should be treated as long term capital asset. However, for shares purchased and sold within 12 months, assessee has returned income as short term capital gains. We do not find any ground to interfere with the Tribunal's order because an assessee engaged in trading in shares or in other words in speculation business in shares, is also free to invest on long term basis in shares and so long as shares are held as investment, the income therefrom on sale after 12 months of holding has to be treated as long term capital gains and the Tribunal rightly held so. However, we make it clear that profit returned on sale of shares within one year of purchase should be treated as short term capital gain. The Assessing Officer will make modification in the assessment in respect of short term capital gains. For period prior to introduction of specific charging provision for short term capital gains, Section 111A of the Income Tax Act, the short term 3 capital gain should be assessed as business income. The appeals are dismissed but with the above finding on short term capital gains. C.N.RAMACHANDRAN NAIR Judge P.S.GOPINATHAN Judge pms