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TMI Blog2014 (2) TMI 837X X X X Extracts X X X X X X X X Extracts X X X X ..... ' income under normal provisions and 'book profit' Rs.52,27,71,157/- under the provisions of section 115JB of the Income Tax Act, 1961 (herein after referred to as 'the Act'). Later on, the assessee filed another revised return on 24-01-2012 declaring 'NIL' income under normal provisions and 'book profit' u/s. 115JB as Rs.52,34,23,763/-. The case of the assessee was selected for scrutiny and notice u/s.143(2) was issued to the assessee on 25-08-2011. In assessment proceedings, the Assessing Officer observed that the assessee-company was incorporated in the year 2007. The assessee had borrowed funds from M/s. S & M Associates for purchase of shares. During the AY.2007-08, the assessee purchased shares of Shriram Transport and Finance Co. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... motive of converting stock in trade into investment during the AY. 2010-11 was evasion of tax. The Assessing Officer held that trading in shares is not incidental activity but main business activity of the assessee. Hence, it is nothing but an 'adventure in nature of trade', the profit out of which is to be assessee under the head 'Business Income'. Aggrieved against the assessment order dated 15-02-2013, the assessee preferred an appeal before the CIT(Appeals). The CIT(Appeals) vide order dated 27-08-2013, confirmed the findings of the Assessing Officer on this issue and dismissed this ground of appeal of the assessee. The assessee has come in second appeal before the Tribunal assailing the order of the CIT(Appeals). 3. Shri R. Sivaram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT reported as 346 ITR 121 (Mad) and the judgment of the Hon'ble Delhi High Court in the case of CIT Vs. Vinay Mittal reported as 208 Taxman 106 (Delhi). 4. Per contra, Shri Shaji P. Jacob, appearing on behalf of the Revenue vehemently supporting the order of the CIT(Appeals) prayed for the dismissal of the appeal of the assessee. The ld. DR submitted that the assessee has been taking inconsistent stand. The shares were purchased by the assessee with borrowed funds and claimed interest paid on borrowings as expenditure. When the assessee intended to sell shares, the same were converted from stock in trade to investment to evade tax liability. As long as the assessee had to pay huge interest on the borrowings, the assessee treated the sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom records that the assessee has made investment in shares from borrowed capital and has been claiming interest paid thereon as expenditure during the period, the shares were held as stock in trade. 6. The provisions of section 45(2) provides that the profit or gain arising from the transfer by way of conversion of a capital asset to stock in trade on a business carried on by him shall be chargeable to income tax as his income of the previous year in which such stock in trade is sold or otherwise transferred by him. For the purpose of section 48, the fair market value of the asset on the date of such conversion or treatment shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the aforesaid decisions do not apply in the facts and circumstances of the present case. In the instant case, the assessee has converted the shares initially held as investment into stock in trade and after two AYs, again converted the stock in trade into investment. The period during which the shares were held as stock in trade, the assessee claimed the interest on borrowings as expenditure. The assessee again in the year of sale of shares converted the shares held as stock in trade into investment and claimed the benefit of section 10. 8. It is not in dispute that when shares were sold by the assessee, they were converted into capital asset. Thus, the gain arising there from on sale would be assessable as capital gain. Now, what ..... X X X X Extracts X X X X X X X X Extracts X X X X
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