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2014 (1) TMI 1302 - AT - Income TaxShort term capital gain treated as business income – Authenticity of valuation of stock - Held that:- The main object of the company clearly show that it want to carry on financing business other than banking business within the meaning of Banking Regulation Act, 1949 - In the light of the Memorandum of Association, in the immediate preceding assessment year and also in the subsequent assessment year, there is not even a single item of income which could be said to be in pursuance of the main object of the company - the assessee has shown income only from share transactions. The capital gains has been shown under the head business income - the assessee has never filed any revised return claiming the income under the head capital gains - The contention that the assessee has been showing the investment under the head investment in the balance sheet do not hold any water because book entries cannot justify the nature of transaction – Relying upon Kedarnath Jute Manufacturing Co. Ltd. Vs CIT [1971 (8) TMI 10 - SUPREME Court] - the assessee clearly show that the assessee has not done any business in pursuant to its main object - Then how the auditors are mentioning that the assessee has maintained purchase and sales register - This also shows that the assessee has done business in shares – there is no reason to interfere in the findings of the CIT(A) - The gains arising out of share transaction have been rightly taxed under the head profits and gains of business or profession. Computation of profits – Held that:- The profits the profit of the assessee arising out of the transactions in shares is to be treated as business income – the AO is directed to recompute the profit after allowing all the expenses directly related to this business of the assessee – AO is further directed to adopt the value of stock of shares at cost or market price whichever is lower. Disallowance u/s 14A of the Act – Held that:- As the matter is already restored to the AO – thus, The AO is directed to make a reasonable disallowance u/s. 14A of the Act without applying Rule 8D for the treatment of capital gains under the head "business income" after giving a reasonable opportunity of being heard to the assessee – Decided in favour of Assessee.
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