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TMI Blog2017 (1) TMI 1088X X X X Extracts X X X X X X X X Extracts X X X X ..... securities etc. It filed its return of income for the AY 2009- 10 on 29/08/2009 admitting total income of Rs. 1,34,97,1340/-. The AO completed the assessment u/s 143(3) determining the total income at Rs. 2,19,96,480/- by making the following disallowances: i) Short term capital gain treated as business income Rs. 77,38,940/- ii) Disallowance of RCC Rs. 3,500/- iii) Disallowance of provision Rs. 84,95,856/- 3. The assessee is in appeal before us against the above disallowances mentioned at i) and iii). 4. As regards the 1st issue relates to the addition of Rs. 77,38,940/- treating the short term capital gain on sale of shares under the head 'income from business', the facts are that the assessee company derives income from provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the submissions of the assessee, the CIT(A) confirmed the action of the AO by holding that the facts and evidence point out unmistakably to the fact that the entire transaction was organized so as to obtain the quick profits through sale of the shares and it is not only the frequency of the transaction but the intent inferred from the overall circumstances which will determine whether the transactions are in the nature of business or not. 6. Aggrieved by the order of the CIT(A), the assessee is in appeal before us. 7. Before us, the ld. AR of the assessee submitted that the issue in dispute is squarely covered by the decision of the coordinate bench of ITAT Hyderabad in assessee's own case for AY 2008-09 in ITA No. 232/Hyd/2012, order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etained was shown as investments. In the circumstances there is nothing to show that the shares sold alone were treated by the Assessee as stock in trade and the balance shares was shown as investment in the balance Sheet. The assessee is in the business providing finance and not trading in shares. Considering all the factors, we conclude that the purchase and sale of shares during the year under appeal can be considered as a part of investment activity of the Assessee and is not trading activity. Hence we direct the AO to assess the profit on sale of the shares of Rs. 1,19,80,047/- as short term capital gains and not as income from business. Further, we wish to make it clear that it is not our opinion that in every case income earned from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons have been provided. It is not even clear whether the stock options belonged to the assessee or to some clients. Moreover, any diminution in the value of the shares of stock or stock options is not to be taken in to the provision. 13. Aggrieved by the order of the CIT(A), the assessee is in appeal before us. 14. Ld. AR submitted that as per assessee's accounting policy, loss on equity stock option of Rs. 84,95,856/- was made in the books of account i.e. the assessee valued its closing stock at cost or market value whichever is lower as per the accounting policy and has accounted for the loss in the value of closing stock. This value has been taken as opening stock value in the next AY i.e. AY 2010-11. He submitted that if this amount i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, it shows that he had accepted the additional evidence and the same is in order. Ld. DR also accepted that the evidence submitted by ld. AR is in order due to the fact that AO has not recorded any negative comments on the additional evidence. Hence, the additional evidence submitted by ld. AR is considered to be in order. 16.1 We have noticed that the assessee is following the Accounting Standard consistently over the years. The assessee has declared the above Accounting Policy in notes to accounts, which is part of balance sheet as under: "3. For equity stock option/index option, provision is made for the mark to market loss as on balance sheet date however mark to market profit is not recognized on prudent basis." As per the above ..... X X X X Extracts X X X X X X X X Extracts X X X X
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