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2016 (11) TMI 1069 - AT - Income TaxAddition on account of negative stock-in-trade as at the year-end - correct head of income - Held that:- Valuation of the relevant scrips as at the year-end may be lower than the ‘cost’ as recorded in books, as where there is a decline in the market price since. The difference, or the said decline, is only a business loss, which gets absorbed in the valuation of the closing stock. No separate addition/adjustment is required to be made/effected, i.e., apart from that in respect of shortfall w.r.t. the cost stated. The exercise for both these additions is to be carried out for all the shares, and not limited to those shares reporting negative quantity as at the beginning and/or at the end of the year, which may well be positive, even as shortfall (negative stock) subsists during a part of the year. Credit in the form of closing stock in every such case (i.e., with reference and toward decline from the peak shortfall during the year, as at the yearend), shall obtain. Also, if the business income is, as contended, assessed as speculative income, the decline therein (on account of the valuation of closing stock) would again stand to be assessed under the same head/category. However, as we shall presently see, i.e., while discussing the Revenue’s appeal, the categorization of the same as speculative is without basis. Addition by way of such adjustment shall again be carried out by allowing the assessee proper opportunity of hearing, meeting its case, if any. Income from share trading - speculative business - Held that:- Share trading, as apparent from the assessee’s final accounts, i.e., income (operating) statement and balance-sheet (as at the year-end) respectively, constitutes a principal business of the assessee-company. Accordingly, and even as observed by the ld. CIT(A), we find no basis for holding the income/loss from the said activity as speculative by the AO, nor was any pointed out to us during hearing. We, therefore, have no hesitation in confirming the impugned order on this score. As regards the reallocation of the administrative expenditure, we find that both the assessee as well as the AO to have allocated the same under different activities without any basis. However, the said allocation is itself rendered of no consequence as the entire business income is to be regarded as nonspeculative. Denying the ‘claim’ for reduction in the closing stock - Held that:- The entire details were examined in the remand proceedings, to find that the revision is on account of revision in the rates of valuation of the closing stock as at the year-end. The revised statement is, in fact, in agreement with the balance-sheet as at the year-end (filed along with the original return); the assessee explaining the stock statement given earlier being as on 04.4.2011, furnished inadvertently. We, in fact, see no issue, i.e., either in principle or on facts. The assessee’s revised return (PB pg. 1) bears no claim for any reduction in stock; it adopting the same figure of profit, i.e., as obtains per the profit and loss account. We have noted that the stock-in-trade at the year-end (Rs.2,74,36,842/PB pgs. 48-57) is in agreement with the figure as per the balance-sheet (PB pg. 7). No error in the impugned revision was also pointed out to us during hearing.
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