9911796707
TMI Blog2011 (11) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... L. MEHTA JJ. Appearances Mr. Sanjeev Sabharwal, Sr.Standing Counsel. For Appellant Mr. Salil Kapoor, Advocate with Mr. Ankit Gupta, Advocate. For Respondent A.K. SIKRI, J. 1. This appeal was admitted on the following substantial question of law: Whether the findings of ITAT are perverse in holding that the loss on sale of shares holding as investment in the books of accounts was revenue loss and not capital loss. 2. The respondent-assessee is a limited company and engaged in the business of leasing, investment in shares and to act as Managers to issue and offers, to give financial assistance in order and abroad, to act administrator or manager of an investment, trust, of fund, to give guarantee or other financial assistance for development of new enterprise, etc. The assessee filed its return of income for the Assessment Year in question, i.e., 2004-05 and the same was assessed under the provisions of Section 143(3) of the Income Tax Act (hereinafter referred to as "the Act"). 3. During the assessment proceedings, the Assessing Officer (AO) noted from the Profit Loss Account of the assessee that the assessee had debited loss on sale of shares a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istently showing these shares as investments in the balance sheets filed alongwith the returns of income. The assessee cannot be allowed to change its stance after 8 years for the purpose of setting off of this loss against business income. In fact and in law, this is precisely what is prohibited in the provisions relating to set off of losses. Apart from the reasons given above, the assessing officer pointed out many circumstantial evidences which according to him went against the assessee's contention, and enumerated these circumstances as under:- (i) In the balance sheet of the assessee, the assessee has shown this 505900 equity shares of ₹ 10/- each fully paid to M/s SBEC Sugar Ltd. as investments and not as stock in trade n the current assets. (ii) These shares were purchased on 27.01.1997 and are only being sold for the first time in F.Y. 2003-04. n the interregnum period from 1997 to 2004, there was no transaction of sale of these shares. (iii) The assessee company M/s Moderate Leasing and capital Services Ltd. is a group company of Modi Group. It is a known business practice of the promoters to make investments in public limited companies through group inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusive part of discussion runs as follows:- having considered the facts of the case and rival decided cases submitted by the both parties, we are of the view that the classification of the shares in the books of the assessee may be one of the factors but not the conclusive factor as the question has to be considered in totality of the circumstances, as held in the case of Janki Ram Bahadur Ram (supra). The decision of the case of Patiala Biscuits Manufacturers Pvt. Ltd., was in respect of preference shares, where there could not have been any possibility of increase or decrease in value because of fixed rate of dividend. However, the assessee held equity shares and incurred considerable loss in this year as well as in the immediately preceding year. Thus, it bore the risk of loss also, which makes the transaction to be in the nature of a trading transaction, especially in view of its main object of dealing in shares. All through, the losses were shown as business losses and this stand was accepted by the revenue in assessment year 2003-04. Therefore, the facts come to close the facts I the case of Dalmia Jain Company Ltd. (supra), in which the transaction was held to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... While showing it in the profit and loss account, the remarks of the auditors become relevant and could not be brushed aside so conveniently as has been done by the Tribunal. Very important fact which is glossed over by the Tribunal is that the respondent/assessee is maintaining two separate portfolios. One portfolio is investment portfolio where shares purchased are shown as investment. Other is business portfolio where share purchased are shown as stock-in-trade. Since the assessee is dealing in the business of sale and purchase of shares as well, in such a scenario when two portfolios are maintained and shares in question are shown in investment portfolio, that would be a very dominant factor disclosing the intention of the assessee as far as shares in question are concerned. When these factors are kept in mind, merely because in the previous year the sale transaction was reflected in the profit and loss account and that was not deducted by the Assessing Officer, would not be a ground to upset the findings of the Assessing Officer and the CIT (A) based on over all appreciation of facts of the case in this year which is a separate and distinct assessment year. 10. The facts of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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