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2008 (4) TMI 539 - ITAT MUMBAIConversion of capital assets u/s 45(2) - Loss on sale of shares deemed to be "short-term capital gains" or "business loss" - converted the investment in shares brought forward from the assessment year 2000-01 into the stock-in-trade - the assessee was not carrying on any sort of business of share transactions and the question of conversion of investment in stock in trade does not arise - HELD THAT:- It is evident from the record that the assessee had suffered a loss in the speculation of shares. Having seen the volume of transactions undertaken by the assessee in the impugned assessment year, it is very difficult to hold that the assessee still holds the investment in shares and securities. It is the sweet Will of the assessee to decide as to when he intends to convert his investment in stock in trade. The assessee has also filed an affidavit to this effect besides the corresponding entries in the books of account on 1-4-2000 and the revenue has not brought anything on record to dispute these facts. The revenue has denied the claim of the assessee on the ground that conversion of investment in stock in trade was done when the assessee was not in business of sales-purchase in share and securities. From a careful perusal of the relevant provisions of section 45(2) of the Act, we find that there should be the conversion of investment or capital asset by the owner as stock in trade of a business carried on by him. The words ‘business carried on by the assessee’ does not mean that before conversion of investment or capital asset in stock in trade the business must be in existence. Moreover, in the instant case, the assessee was already in the business of manufacture and sale of furniture and section 45(2) does not state that the investment can only be converted in a stock in trade of the business of trading in shares. The assessee can undertake multiple business activities under his proprietary concern. Besides, the manufacturing and sale of furniture, the assessee can also deal in trading in shares in the name of same proprietary concern keeping the stock in trade of shares separate. From any angle, if the facts of the case are viewed, we would find that the conversion of investment in shares and securities in stock in trade is valid and the assessee is entitled to benefit of section 45(2) of the Act in the light of huge volume of transactions in shares. We accordingly do not find any infirmity in the order of the CIT(A) as he has dealt with each and every aspect raised by the parties. We accordingly confirm the same. Accordingly, appeals in both the cases are dismissed - In the result, the appeals of the revenue stand dismissed.
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