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Issues:
Treatment of dealing in shares as business income or investment, deduction of interest paid, challenge of re-opening of assessment under section 147. Analysis: The appeals were filed against the order of CIT(Appeals) regarding the treatment of dealing in shares as business income or investment. The Assessing Officer held that the shares were investments and not stock-in-trade, disallowing the deduction of interest paid by the assessee under section 57 of the Income-tax Act. The dispute revolved around the nature of income from share transactions for the assessment years 2000-01 and 2001-02. The assessee claimed that the share transactions constituted business income, supported by evidence of regular sales and purchases of shares, which indicated a profit motive rather than mere investment. The assessee had been engaged in trading shares since 1997-98, as evidenced by the nature of business disclosed in the return of income. The Tribunal noted that the treatment of shares as investments in the balance sheet did not determine the nature of income, emphasizing that the principles of accountancy do not override income tax laws. The Tribunal analyzed the volume, frequency, and regularity of transactions to conclude that the assessee was indeed engaged in the business of shares. Citing a similar view taken by the Ahmedabad Bench of the Tribunal, the Tribunal held that the expenses claimed by the assessee should be allowed as business expenditure due to the profit motive behind the transactions. Regarding the challenge of re-opening the assessment under section 147 for the assessment year 2000-01, the Tribunal decided in favor of the assessee on the merit of the case, rendering the issue of re-opening irrelevant. Consequently, the appeal for the assessment year 2000-01 was partly allowed, while the appeal for the assessment year 2001-02 was allowed in full.
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