9911796707
TMI Blog2013 (9) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... amply show that the profit from sale of such shares cannot be considered as Business income as has been held by the authorities below - Decided in favour of assessee. Sale of shares - repeated transaction in the case of shares of Steel Authority of India Limited - Held that:- The facts indicate that the profit of Rs.5.61 lakh resulting from the transfer of these shares is in the nature of "Business income" and not short term capital gain as claimed by the assessee. In view of the foregoing discussion - Held as business income - Decided against the assessee. Disallowance of bad debt - Held that:- The interest income so shown by the assessee was duly accepted as business income. That is how in all the earlier years the stand point of the assessee that the interest was earned from money lending business came to be accepted by the Assessing Officer through various orders passed for several years in scrutiny assessment. In such a situation the non-recovery of Rs.15 lakh out of the loan advanced in earlier years, interest from which was shown as business income, cannot be considered as anything other than bad debts of the money lending business. Sub-section (2) of section 36 clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son to deviate from the earlier stand. This was sought to be rebutted by the assessee stating that the shares were held as Investment' through out the earlier years and were consequently valued at cost. It was only for the purpose of the head under which the income falls, that the assessee treated it as Business income'. Not convinced with the assessee's submissions, the Assessing Officer rejected the assessee's stand and held that the entire profit from sale of shares should be treated as Business income chargeable to tax at normal rates. The learned CIT(A) upheld the assessment order on this point, against which the assessee has come up in appeal before us. 4. We have heard the rival submissions and perused the relevant material on record. Insofar as the position in the earlier years is concerned, it is seen that the assessee was regularly showing the shares as his "Investment" in the Balance sheets and also valuing them as Investment' at Cost price' and not as Stock in trade' in which case the valuation should have been done at Cost or market price, whichever is less'. At the same time, it is equally true that in the earlier years the assessee offered profit from sale of share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to reap the immediate profit so that the sale proceeds may be turned over time and again, investment is made with a view to gain from appreciation in its value over a relatively longer period rather than realizing immediate profit on sale. It is axiomatic that profit resulting from the transfer of stock in trade is Business income', but from investments is Capital gain'. When the facts of the instant case are tested on the touchstone of above test for determining as to whether the shares were held as investment or stock in trade, we hardly encounter any difficulty in concluding that the assessee had purchased these shares with the intention of capital appreciation and not for harvesting the immediate profit from their sale. The fact that these shares were held for such a long period amply demonstrates that the intention of the assessee was to keep such shares as Investment'. The further fact that the assessee consistently showed such shares as "Investment" in his balance sheets of the earlier years clearly brings out his intention of retaining the shares as Investments' and not as Stock in trade'. If such shares had been held as stock in trade, naturally these would have been valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isition of such shares, treatment of such shares as Investments' in earlier balance sheets and valuing these shares as like Investment' and not as Stock in trade', we reach an irresistible conclusion that income from sale of such shares was rightly claimed as long term capital gain. The impugned order on this issue is overturned. 6. Insofar as the second aspect of the first ground about the treatment of Rs.5.61 lakh as short term capital gain is concerned, we find that there is a list of shares resulting into short term capital gain, placed on page 2 of the paper book. From this list it can be seen that the period of holding is short. In the case of shares of Steel Authority of India Limited, the assessee purchased, sold, repurchased and resold shares on different occasions. In certain other shares also, this feature can be observed that there is a repeated entry and exit into/from the same scrip. When the assessee repeatedly enters into the same shares time and again with a view of reap the benefit from the immediate increase in price, these cannot be considered as anything other than Stock'. It is worth mentioning that in the subsequent years also the assessee consistently show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ending business and hence should be considered as bad debt u/s 36(1)(vii). Au contraire, the view point of the Revenue is that this is not a business loss and hence not deductible. 9. It is noticed that the assessee advanced a sum of Rs.40 lakh to M/s.Aircommand Limited in the year 1993-94. Apart from that, the assessee also advanced money to certain other entities from which he earned interest income in the earlier years as well. The assessee lent a sum of Rs.1.51 crore for the assessment year 1999-2000 and earned interest on such loan at Rs.35.16 lakh. For the assessment year 2000- 2001 the assessee earned interest income of Rs.22.58 lakh, for the assessment year 2001-2002 earned interest income of Rs.23.65 lakh, for the assessment year 2002-2003 earned interest income of Rs.18.30 lakh, for the assessment year 2003-2004 earned interest income of Rs.17.55 lakh, for the assessment year 2004-2005 earned interest income of Rs.7.67 lakh. The assessee offered such interest as Business income in all the earlier years, which stood accepted by the Revenue as such. For some of the years, the assessment orders have been passed u/s 143(3) accepting the assessee's claim of interest falling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the interest income earned during the year amounting to Rs.17,391 as Income from other sources'. Consistent with the stand for not allowing deduction of Rs.15.00 lacs towards bad debts that the money lending was not the business of the assessee, the AO held that the interest income earned from such money lending in the instant year was chargeable to tax under the head Income from other sources', which came to be approved by the ld. first appellate authority as well. 11. In view of our detailed discussion made in respect to ground no.2 above in which it has been held the assessee was engaged in the business of money lending business as accepted by the Revenue itself in earlier years, the natural consequence which follows is that interest of Rs.17,391 earned by the assessee in the year in question should also be considered as Business income'. This ground is allowed. Assessment Year 2006-2007 12. The only issue raised by the Revenue in its appeal is against treating the profit from sale of shares held for more than one year as long term capital gain as against the A.O.'s action of business income. The position for the instant year is mutatis mutandis similar to that for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
