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TMI Blog2011 (5) TMI 1029X X X X Extracts X X X X X X X X Extracts X X X X ..... in holding that the income generated by dealing in shares and securities by the assessee was to be treated as income from "Capital Gain" and not income from business as was assessed by the AO. 3. The appellant craves leave to add, alter or amend any/all of the grounds of the appeal before or during the course of the hearing of the appeal." 2. The assessee company is recognized by the Reserve Bank of India as non-banking financial corporation. The company is having an investment portfolio and has held certain shares in stock-in-trade. During the year under consideration vide resolution dated 22nd April, 2004 it was resolved that stock-in-trade amounting to ₹ 79,73,293.15/- held by the company in shares/ securities of other bodies co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 31.3.2004 has been taken into account by working out of the closing stock of the shares and this has been taken into account for working out the profits for that year. It has been further found by the ld. CIT(A) that the market value as on 31.3.2004 has been taken as the cost of acquisition of these shares and the difference between cost of acquisition and the sale price has been offered for taxation as income from short term capital gain. On these facts, ld. CIT(A) has decided the issue in favour of the assessee by following certain decision of Tribunal and has held that the gain of the assessee is to be assessed as short term capital gain in place of business income treated by the AO. The AO had held that frequent transaction of purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant portion of the said order is reproduced below: - "2. The issue raised is that Ld. Commissioner of Income Tax (Appeals) erred in directing to treat the assessee as investor in shares as against treatment by the Assessing Officer of assessee as a trade. 3. The assessee in this case has declared income from long term /short term capital gains and income from business and profession. The Assessing Officer in this case observed that assessee was holding shares mainly of group companies including of Dabur India Ltd. as investment since long back. The assessee was also engaged in purchase and sale of shares and mutual funds mostly of Blue Chip Companies as stock-in-trade. During the year under consideration, assessee has transferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om stock in trade into investments. The resolution was approved by the Board and later on the appellant has followed the same method of valuation at cost price on permanent basis. It is observed from the details submitted before the Assessing Officer that the shares held in stock in trade have been converted into investments w.e.f. 1st of April, 2004. The value of acquisition has been taken to be the market value as on 31st of March, 2004. It is submitted by the counsel of the appellant that the difference between purchase price of the scrip and the market value as on 31st of March, 2004 have been taken into account while working out the profits for the year ending as on 31st of March, 2004. It is clear from the balance sheet for the financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion at cost price on permanent basis. Part of theses shares were sold by the appellant during the year. The appellant had taken the closing value as on 31.3.2004 as the cost of acquisition and without taking the benefit of indexation, the difference between the sale price and the cost of acquisition has been offered for taxation as short term capital gain. It is worth mentioning here that whereas the shares held by the company in the trading account were transferred to the investment portfolio, however, the trading in mutual funds continues to be business activity of the company. In view of the facts discussed above and decision of the Hon'ble ITAT in the case of ACIT vs. Bright Star Investment Pvt. Ltd. and M/s Sarnath Infrastructure Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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