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TMI Blog1998 (11) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... deduct the diminution in the value of the shares held on the Balance Sheet date; (ii) to delete the appreciation in the value of shares held on the Balance Sheet date; (iii) to claim depreciation on the various assets held for hire purchase business; (iv) to delete the levy of interest under sections 217, 234B; and (v) to delete the addition of the add-back of depreciation adjusted in section 143(1)(a) of the Act. 4. These appeals are clubbed together for joint hearing and analogous disposal by this common order. The issues involved in these appeals are considered and decided with reference to each assessment year in appeal. 5. Assessment year 1988-89 1. The first ground of appeal is that the Commissioner of Income-tax(A) has erred in allowing the difference/fall in market value of shares of Rs. 2,73,550 on 31-12-1987. 2. The assessee was holding shares for Rs. 7,08,000 as on 31-12-86 at cost price. During the previous year under appeal, the assessee further invested in shares for Rs. 2,61,000. On the close of the previous year as on 31-12-1987, the total investment in shares was Rs. 9,69,000 at cost. The total of the market value of those shares on that date was Rs. 6,95,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn the shares and securities under the head 'Investments' (Schedule No. 5 to Balance Sheet). In the Balance Sheets for the subsequent periods ending on 31-3-1989 and 31-3-1990, the shares and securities have been shown as "stock-in-trade (shares)" as per Schedule No. 6. As rightly pointed out by the learned C.A., the nomenclature given to the classification of assets in the accounts alone need not determine the true nature of the assets to see whether those assets are held as stock-in-trade or investments or fixed assets, as the case may be. One has to examine the real purpose and intent for which the relevant assets are held. 7. In the present case before, so as to say, there is no direct evidence to show that the assessee has carried on the business of dealing in shares and securities in addition to its main business of hire purchase and leasing. So the nature of the asset has to be ascertained from the intention of the assessee as gathered from the conduct of the assessee. 8. The assessee is a limited company. It is an artificial juridical person. It has no living mind of its own. Its intention has to be seen from the references and reflections available in its accounts, repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50,186 and the market value was Rs. 2,57,200. No provision was made in the accounts to cover losses if any in the value of investments." The above observation demonstrates that the assessee had no intention to treat the valuation loss as an actual treading loss. The assessee treats it only as a contingent loss. 11. As examined in paragraphs 7, 8, 9 and 10 above, it is found that the intention of the assessee to treat the shares and securities as stock-in-trade is not evident for clear from its accounts, statements, reports or resolutions. 12. Moreover, the assessee is not a member of any Stock Exchange or any authorised share broker. Therefore, the assessee company cannot carry on any business of dealing in shares and securities. Every purchase of shares and securities, therefore, could be only investments in the hands of the assessee. It may be a short-term or long-term investment, depending on the period of holding, but it cannot be stock-in-trade. 13. The case-law referred to by the learned Chartered Accountant for the assessee stands on a different footing. In that case, a banking company claimed income arising from securities as business income. The bank was bound by law t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer rectified the assessment order dated 15-3-1991 under section 154, vide his order dated 5-6-1991 to make good the short levy of tax. In the said 154 order, the Assessing Officer has also levied interest under section 217 for failure of estimating the advance tax payable by the assessee. 19. The levy of interest was challenged in first appeal. The Commissioner of Income-tax(A) in his common appellate order considered this appeal also and held that the Assessing Officer was not justified to levy tax under section 217. 20. The assessee has raised a preliminary objection in admitting and hearing this ground advanced by the Revenue. Interest has been levied by a separate order passed under section 154. The assessee has filed separate appeals before the Commissioner of Income-tax(A) - one against the original assessment order under section 143(3) and the other against rectification order passed under section 154. The Commissioner of Income-tax(A) disposed those two appeals by a consolidated order which is impugned in these appeals. According to the assessee, even though the Commissioner of Income-tax(A) has disposed both the appeals filed by the assessee in a common order b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of procedure. In this case, the assessment order under section 143(3) is the principal order. The order under section 154 is only a consequential order arising out of the income assessed in the principal order. The order under section 143(3) and the order under section 154 are inter-related that the latter arises only out of the former, that the assessee being the same, that the assessment year being the same, that the first appellate order appealed against is a single and consolidated one; that the issue arises out of the consolidated order and therefore, in the circumstances, we find that the Revenue could contest the issue of interest levied under section 154 by raising a separate ground in the appeal arising out of the assessment order. The Commissioner of Income-tax(A) has consolidated both the appeals filed by the assessee and has disposed those appeals by a common order. Therefore, as far as the Tribunal is concerned, the issue of assessment as well as the issue of interest arises out of a single and consolidated order in which both the orders under section 143(3) and under section 154 are merged together. From this point of view also, we find that the Revenue is entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of assets sold on hire-purchase with effect from assessment year 1988-89 which was not accepted for reasons stated in the assessment order for 1988-89. Originally the assessee was dividing the instalment charged on the assets into two parts viz. (1) Portion towards principal and (2) Finance charges and offering only Finance Charges as income. But 1988-89 it had changed the method and wanted to offer the entire instalment as income and claimed depreciation on asset. The nature of instalment ie., whether it is entirely towards hire-purchase or towards lease rental could not have charged unless there was a change in the agreement with the hire-purchaser. Such a change in the Agreement was not made. The assessee sells on hire-purchase consumer goods such as TVs & Fridges. The assessee has an eye on the higher depreciation rates brought into effect and in order to derive advantage of higher depreciation rates, shifted its stand about the nature of instalment. The hire-purchaser who is a consumer will not be eligible to depreciation by and large as TVs and Fridges are rarely purchased by business concerns or for business purposes. Such oblique procedures are squarely covered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve. We have not considered the view of the Assessing Officer mentioned in the assessment order that the change in the method of accounting was not genuine or the case is covered by Supreme Court decision in McDowell & Co. Ltd. vs Commercial Tax Officer [1985] 22 Taxman 11 etc. for the purpose of deciding the above issue. Likewise, we have not either sit in judgment on the finding of the Commissioner of Income-tax(A) that the change in method of accounting was bona fide and the assessee was entitled for depreciation as the rightful owner of the hire-purchase assets. 7. The assessee has disclosed an amount of Rs. 91,710 in its computation of income towards the value of appreciation of the share and securities held by it. The Commissioner of Income-tax(A) deleted the amount from the income on the ground that the assessee is entitled to value its stock at cost or market value whichever is less, and therefore, the appreciation worked out on the market value could not be treated as income. 8. We have already considered the nature of holding of the assessee of shares and securities in paras 5.7 to 5.14 above in respect of the assessment year 1988-89. We have made a finding that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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