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2015 (7) TMI 679 - AT - Income TaxIncome arising out the sale of share/unit - Capital gain or Business income - conversion of stock-in-trade into investment - Held that:- We have gone through ledger accounts of the assessee for the year under consideration and noticed separate ledger accounts in respect of conversion of stock-in-trade into investment. By converting the stock-n-trade into investment, it does not alter the character, nature and intention of that particular transaction especially in the context of capital gain versus business income. By bringing in stock-in-trade under the head investment the assessee could reduce the tax incidence considerably. The activity of ‘trading in shares’ carried out separately in the AY 2004-05 and again brought forward to be continued in the next AY i.e. 2005-06 under the head ‘investment’ is to be considered as trading activity only. Subsequent conversion and treatment given in the books of accounts do not alter the character of commercial transaction. Accordingly, the profit that has been attributable to this trading activity corresponding to conversion of stock-in- trade into investment is to be treated as ‘business income’ and accordingly to be taxed. In view of the above findings of CIT(A) that the income from investment is to be taken as ‘capital gains’ and conversion of stock-in-trade to investment is to be taken as ‘trading income’, which is based on facts of the case and need no disturbance. Accordingly, we confirm the findings of CIT(A). - Decided against revenue. Disallowance on travelling and conveyance charges - CIT(A) allowed claim - Held that:- As seen from the assessment order except questioning the rationality of the expenditure in the absence of carpet business, the AO has not brought on record any material evidence to dispute the reasonability and purpose of the expenditure incurred. As argued by the assessee, the AO has not disproved expenditure incurred nor proved such expenditure was personal in nature or capital in nature. The books of accounts are audited and auditors have not pointed out any discrepancies in the nature of personal expenses or capital expenditure debited to profit and loss account. During the course of hearing, the Ld. counsel for the assessee clarified that the expenditure incurred on travelling and conveyance was mainly on account of foreign tour to interact with business people and to explore the prospects of export in carpets and garments which is otherwise the main line of business activity of the assessee. Accordingly, we confirm the order of CIT(A).- Decided against revenue. Disallowance u/s 14A and new Rule 8D (2)(iii) - Held that:- Since CIT(A) confirmed the disallowance at 10% made by the AO but we are consistently taking a view that prior to AY 2008-09, disallowance @1% will meet the end of justice, by following the decision of co-ordinate Bench ‘C’ Kolkata cited (2011 (4) TMI 1283 - ITAT KOLKATA). This ground of assessee’s CO is partly allowed.
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