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TMI Blog2015 (11) TMI 1658X X X X Extracts X X X X X X X X Extracts X X X X ..... , follows that the shares sold by the assessee during the year under consideration continued to constitute its stock in trade and not investment. Consequently the profit arising from the sale of the said shares, in our opinion, is chargeable to tax in the hands of the assessee as its business income as rightly held by the Assessing Officer and not long-term capital gain as held by the ld. CIT(Appeals). We, therefore, set aside the impugned order of the ld. CIT(Appeals) on this issue and restore that of the Assessing Officer. - Decided in favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year relevant to A.Y. 2005-06. The balance 33,000 shares of Chambal Fertilisers Chem Limited and 14,580 shares of Eveready Industries Limited were sold by the asseessee during the year under consideration and the profit arising from the said sale was claimed to be exempt from tax being long-term capital gain. In the assessment completed under section 143(3) for A.Y. 2005-06, the claim of the assessee for conversion of shares from stock in trade into investment was not accepted by the Assessing Officer and relying on the said decision, the Assessing Officer in the year under consideration did not accept the claim of the assessee for exemption on account of long-term capital gain arising from 33,000 shares of Chambal Fertilisers Chem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness and the claim of the assessee company to treat the same as capital gain denied. As seen from Income Tax Act, the IT Act does not contain any provisions prohibiting the conversion of shares from Trading Account to Investment Account. The ITAT Mumbai 'H' Bench in the case of ACIT vs. Bright Star Investments Pvt. Ltd. [2/07/2008] in their order held that assessee converted same shares from stock in trade to investment on 1st April 1998 at Book Value, thereafter sold them and claimed the receipts as long term capital gains A.O. applying Section 45(2), treated the receipts as business income upto the date of conversion and thereafter long term capital gains. The Hon'ble ITAT further observed "While incorporating the subsection (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the shares on the date of conversion, be taken as a capital gain. The other formula which is adopted by the assessee i.e., the difference between the sale price of the shares and this cost of acquisition of share, which is the book value on the date of conversion with indexation from the date of conversion, should be computed as a capital gain. In the absence of specific provision, out of these two formulae, the formula which is favourable to the assessee, should be accepted". In case of CIT v. Dhanuka and Sons 124 ITR (Cal) it has been categorically held that profit and gains on shares transferred from trading account to investment account at prevailing market rate is not a transaction at all because a person cannot have transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08. He has contended that the shares sold by the assessee during the year under consideration thus are held to be stock in trade of the assessee by the Tribunal in the immediately preceding year, i.e. A.Y. 2005-06 and consequently the profit arising from the sale of the said shares in the year under consideration is liable to be assessed to tax in the hands of the assessee as business income as rightly held by the Assessing Officer. The ld. Counsel for the assesese, on the other hand, has relied upon various judicial pronouncements, wherein a similar conversion of sales by the assessee from stock in trade into investment has been accepted. He has contended that the issue involved in this appeal of the Revenue thus is squarely covered in fav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delay of 21 days on the part of the assesese in filing this Cross Objection. In this regard, the ld. Counsel for the assesese has filed an application seeking condonation of the said delay and keeping in view the reason giving therein, which are duly supported by an affidavit filed by the assessee, we are satisfied that there was a sufficient cause for the delay on the part of the assessee in filing this C.O. before the Tribunal. We, therefore, condone the same and proceed to decide the Cross Objection filed by the assessee on merit. 8. At the time of hearing before us, ld. Representatives of both the sides have agreed that the solitary issue involved in the C.O. of the assessee relating to the disallowance made by the Assessing Officer u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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