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2014 (9) TMI 161 - ITAT JAIPURGenuineness of transaction - Whether purchase transactions of shares of LIL are genuine – Held that:- The transaction of purchase was arranged through M/s P.K. Agrawal & Company. Shares in both the cases are of the same company i.e. LIL - Both the assessees considered shares as stock in trade and computed loss by valuing shares at a prevailing market price on the year ending - What difference the margin money of ₹ 1.35 lac would make to the purchase consideration of ₹ 11.05 lac in the case of Ratan Lal Baid, is beyond my comprehension when we consider it in the light of the fact that the assessee also made purchases in identical circumstances - profit of ₹ 1.27 lac earned by the instant assessee on shares of LIC Housing Finance on 03/09/2004 also remained with P.K. Agrawal & Company - there can be no doubt about the genuineness of the purchase transactions of shares of LIL between the assessee and Shri P.K. Agrawal. Whether the shares are 'Investment' or 'Stock' –Held that:- If the shares are construed as 'Investment', then obviously there can be no question of computing any loss on valuation until these are sold - It is only if the shares are held as stock in trade, that the regular method of valuing closing stock "at cost of market price, which is less" would apply so as to reduce the market price of shares to ₹ 2.64 lac - a transaction of purchase cannot be deferred till the actual possession of shares is received or payment is made - the assessee instructed P.K. Agrawal & Company to purchase shares on her behalf in the year relevant to the assessment year - The shares were purchased in the instant year alone, but the delivery was not given to the assessee till the payment, which event took place in the subsequent year - As the dates of contracts of sale as declared by the parties fall in the instant year and these were actually followed up by actual delivery of shares, these transactions need to be considered in this year alone - since the AO himself held these to be trading transaction though relevant to the next year, the character of such purchase transactions of shares is not disturbed - such shares were held by the assessee as 'Stock in trade' and not as 'Investment'. Nature of transaction - Whether the transaction is Speculative or Non-speculative transactions – Held that:- The mere fact that the delivery was not received up to 31/3/2005, being the year ending relevant to the A.Y. under consideration, would not make a non-speculative transaction to be a speculative one - Since the assessee received delivery of shares, the character of non-speculative transaction cannot be changed by viewing this transaction as on 31/3/2005, till which date no delivery was received - it is not a case that transactions of purchase were settled otherwise than by way of actual delivery - the assessee received the delivery of shares after making due payment by cheques – the transactions of purchase cannot be considered as speculative transactions. Loss in shares disallowed - Whether the CIT(A) was justified in deleting the addition made by the AO on account of disallowance of loss in shares – Held that:- The transactions for purchase of shares of LIL made by the assessee are genuine. Further such shares were purchased as 'stock in trade' in a non-speculative business and the resultant loss arising out of the valuation of such shares at the market rate on the year end, which is obviously less than the cost price, is fully allowable - CIT(A) was justified in deleting the addition made by the AO on account of disallowance of loss in shares – Decided against Revenue.
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