2013 (4) TMI 91 - AT - Income Tax

Loss on sale of shares of Divis Labs Ltd - speculation loss v/s contrived loss Held that - The factual position that emerges is that the assessee had entered into transactions of purchase and sale of shares of Divis Labs Ltd., a company listed on the stock exchange. The transactions of sales were entered before the corresponding purchase transactions and without any existing stock being available with assessee. CIT (A) has observed that the activity of first selling and then purchasing the shares to be a permissible and normal business activity in share transactions, further the purchase and sell of shares were evidenced by purchase and sales bills which were produced during the assessment proceedings. The shares were sold first with the intention to purchase the same when its prices fell down but since the price of shares increased, the assessee had to purchase the shares to minimize the loss. In view of these facts, the CIT (A) has held the loss of Rs.31,39,183/- to be a speculation loss and not a contrived loss. These facts have not been controverted by Revenue by bringing any material on record - no reason to interfere with the order of CIT (A) - against revenue. Addition on Profit on sale of shares of TV Today - CIT(A) deleted the addition - Held that - CIT (A) has given a finding that the purchase of 8200 shares of TV Today was accounted in the individual account of Hasmukh Vora, the payment of shares have been made from the account of Hasmukh Vora and the same is also reflected in the return of income of Hasmukh Vora for A.Y. 2004-05 in his individual capacity. These facts have not been controverted by Revenue by bringing any contrary material on record. Thus no reason to interfere with the order of CIT (A). Thus this ground of the Revenue is dismissed.

Summary

Issues:
1. Appeal by Revenue and cross objection by assessee against the order of CIT (A)-I, Ahmedabad for the assessment year 2004-05.

Analysis:
1. The appeal by the Revenue and cross objection by the assessee were filed against the order of CIT (A)-I, Ahmedabad for the assessment year 2004-05. The Revenue raised grounds related to the treatment of loss on sale of shares of Divis Labs Ltd. and addition of profit on transactions of TV Today shares. The assessee, on the other hand, challenged the treatment of loss as speculation loss by CIT (A).

2. The first issue pertained to the loss on sale of shares of Divis Labs Ltd. The Assessing Officer (A.O.) disallowed the loss of Rs.31,39,183/- as a contrived loss, considering the transactions as paper transactions. However, CIT (A) deleted the addition, treating it as speculation loss. The CIT (A) highlighted that the shares were sold first with the intention to purchase them back when prices fell, which is a recognized business practice. The Revenue contested this decision, but the Tribunal upheld CIT (A)'s order, emphasizing that the loss was rightly treated as speculation loss.

3. The second issue involved a profit of Rs.1,65,471/- on the sale of TV Today shares. The A.O. added this profit to the assessee's income, alleging that the transaction of 8200 shares was not disclosed in the return of income. However, CIT (A) deleted this addition after finding that the purchase of 8200 shares was properly accounted for in the individual account of Hasmukh Vora. The Tribunal upheld CIT (A)'s decision, stating that the facts presented were not contradicted by the Revenue.

4. The Tribunal dismissed the appeal of the Revenue, upholding CIT (A)'s orders on both grounds. The cross objection filed by the assessee was also dismissed as it was not contested by the Revenue. The Tribunal affirmed the treatment of the loss on shares of Divis Labs Ltd. as speculation loss and the deletion of the profit on TV Today shares from the assessee's income.

In conclusion, the Tribunal's judgment favored the assessee by upholding CIT (A)'s decision on both issues, emphasizing the permissible business practices in share transactions and the lack of contradictory evidence presented by the Revenue.