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2013 (9) TMI 11 - AT - Income TaxBusiness income or Capital gain - Profit from sale of shares - AO treated the entire profit from sale of shares as Business income chargeable to tax at normal rates. - Held that:- The fact that shares were held for such a long period amply demonstrates that the intention of the assessee was to keep such shares as Investment'. The further fact that the assessee consistently showed such shares as "Investment" in his balance sheets of the earlier years clearly brings out his intention of retaining the shares as Investments' and not as Stock in trade'. If such shares had been held as stock in trade, naturally these would have been valued at Cost or market price, whichever is less' and not at Cost price'. These facts indicate that insofar as profit from transfer of shares held for such a long period is concerned, it cannot be classified as Business income but has to be held as long term capital gain. Another salient feature, which is relevant but not decisive, is that the assessee had purchased the shares with his own capital and there is no outstanding loan in his balance sheet. These facts amply show that the profit from sale of such shares cannot be considered as Business income as has been held by the authorities below - Decided in favour of assessee. Sale of shares - repeated transaction in the case of shares of Steel Authority of India Limited - Held that:- The facts indicate that the profit of Rs.5.61 lakh resulting from the transfer of these shares is in the nature of "Business income" and not short term capital gain as claimed by the assessee. In view of the foregoing discussion - Held as business income - Decided against the assessee. Disallowance of bad debt - Held that:- The interest income so shown by the assessee was duly accepted as business income. That is how in all the earlier years the stand point of the assessee that the interest was earned from money lending business came to be accepted by the Assessing Officer through various orders passed for several years in scrutiny assessment. In such a situation the non-recovery of Rs.15 lakh out of the loan advanced in earlier years, interest from which was shown as business income, cannot be considered as anything other than bad debts of the money lending business. Sub-section (2) of section 36 clearly provides that in making any deduction for bad debt or part thereof, no deduction shall be allowed unless the debt or part thereof inter alia represents money lent in the ordinary course of business of money lending which is carried on by the assessee. Since the assessee is admittedly engaged in the money lending business and a sum of Rs.15 lakh turned out to be irrecoverable from such business, there is no justification in denying the deduction u/s 36(1)(vii) read with section 36(2) - Decided in favour of assessee.
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