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TMI Blog2016 (1) TMI 605X X X X Extracts X X X X X X X X Extracts X X X X ..... at in accordance with the method regularly followed by the assessee. The AO has further pointed out that the closing stock of the first year becomes opening stock of the succeding year and hence the ultimate tax effect would be nil. In our view, there is merit in the stand taken by the assessing officer. As observed by him the Profits and gains of business has to be arrived at the method of accounting regularly followed by the assessee. Since the assessee has chosen to value its closing stock of shares at Cost price, we are of the view that the tax authorities are justified in rejecting the claim of the assessee to value the shares at lower of cost or market value. - I.T.A. No.5395 and 5396/Mum/2011 - - - Dated:- 28-10-2015 - SHRI B.R.BASKARAN, AM AND AMARJIT SINGH, JM For The Assessee : Shri S V Joshi For The Revenue : Shri Sujit Bangar ORDER Per B R Baskaran, AM: Both the appeals filed by the assessee are directed against the common order dated 06-04-2011 passed by Ld CIT(A)-9, Mumbai for assessment years 2004-05 and 2005-06. The issues urged in both these appeals are identical in nature and hence they were heard together and are being disposed of by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the matter to the file of Ld CIT(A) with the direction to pass a reasoned order. In the set aside the proceedings, the Ld CIT(A) confirmed the order of the assessing officer. 6. The Ld Counsel appearing for the assessee submitted that the assessee had held the shares for sufficiently long period and further the own funds available with the assessee were sufficient enough to make the investments. He further submitted that the assessee has shown the purchase of shares as Investment in its books of account and also earned sufficient amount of dividend income. Accordingly he submitted that the tax authorities are not justified in assesing the profit arising on sale of shares as business income of the assessee. He further submitted that the Tribunal has considered an identical issue in AY 2006-07 and has held that the profit arising on sale of shares is assessable as Capital gain only. 7. The Ld D.R, on the contrary, submitted that the assessee has borrowed funds for purchasing shares. Further the volume of purchase and sales are very high which would vindicate the stand of the AO that the assessee has acted as trader in shares. He further submitted that the assessee has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been fully funded by the borrowed funds of ₹ 1082.08 lakhs only. Thus, we notice that the assessee has purchased shares only out of borrowed funds during the financial year relevant to the AY 2004-05. In the year relevant to the assessment year 2005-06, the assessee has brought in Share capital to the tune of ₹ 5.00 crores. However, we notice that the borrowings have come down only to ₹ 836.68 lakhs, which means that the assessee has repaid loans only to the tune of ₹ 245.40 lakhs. The repayment of loan was equivalent to the profit earned in the immediately preceding year, which means that the share capital raised during the year relevant to AY 2005-06 was not used to repay the loans. These factual figures would show that the assessee has continued to use the borrowed funds for its share trading activity during the year relevant to AY 2005-06 also. 11. We have earlier noticed that there is merit in the observation of the tax authorities that the assessee has carried out the share trading activity in a continuous manner, in view of the huge volume of purchases and sales. The very fact that the assessee has incurred losses also in the share trading acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id that the assessee s intention at the time of purchase of shares was to hold them as investments. In our view, the assessee s conduct and surrounding circumstances discussed above would show that the assessee has actually intended to deal in shares as a trader only. Hence, in our view, the Ld CIT(A) was justified in confirming the assessment of profit arising on sale of shares as business income of the assessee. 15. Before us, the assessee placed reliance on the order passed by the co-ordinate bench in AY 2006-07, wherein the Tribunal has reversed the findings of the assessing officer, i.e., this issue was decided in favour of the assessee. We further notice that the order passed by the Tribunal for AY 2006-07 was subsequently followed by the Tribunal in AY 2007-08 and 2008-09. Admittedly all the above said orders pertain to succeeding years, where as we have considered the facts available on record for the years under consideration and confirmed the order of the Ld CIT(A). The assessee has also placed reliance on the decision rendered by the Hon ble Bombay High Court in the case of CIT Vs. Gopal Purohit (ITA No.1121 of 2009 dated January 6, 2010). We are unable to understand ..... X X X X Extracts X X X X X X X X Extracts X X X X
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