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2017 (7) TMI 1048 - HC - Income TaxShares treated as stock in trade of the assessee company - Held that:- Underwriting or subscription in shares, debentures or other securities of industrial concerns and the rendition of financial assistance by various modes including loans, guarantees and under writing subscription. The assessee was thus incorporated solely for the purpose of ensuring and facilitating growth and development of industries in the state of Tamilnadu. Investment by way of subscription to shares is solely on account of the under writing operations. Such being the position, the investments are of the nature of stock-in-trade and cannot be held to be otherwise. In fact, this aspect of the matter was decided by the Income Tax Appellate Tribunal in the assessee's own case in respect of assessment year 1970-71 wherein, by a well reasoned order dated 14.3.1975, the stand of the assessee that investment in companies would constitute represent stock in trade, was accepted. Question No.2 is thus answered in favour of the assessee and against the revenue. Loans to companies in liquidation had become bad debts and ought to be written off - whether he Tribunal was right in allowing the re-valuation of only loss making shares at market value? - Held that:- A detailed analysis has been undertaken therein with respect to various items identified and sought to be written off in view of the doubtful character of recovery of loans and investments. Investments in the shares of six industrial companies were undertaken by way of underwriting of issue of shares. Upon finding that the net worth was negative, it was proposed to write off 100% of such investment in five cases. In the matter relating to one defaulter, M/s. Southern Brick Works Limited, the recommendation for write-off was only 50% of the investment, in view of a proposal for take over of the entity by M/sVinichem Private Limtied. The note also proposes the write-off of an amount of ₹ 33.82 lakhs being 90% of the advances made to two companies, M/s.Upper India Bearings Limited and M/s. Nedumbalam Samiappa Annapoorani Mills Limited, where creditors had approached the High Court seeking their winding-up and receivers had been appointed. The need for and criteria adopted for the valuation of the shares as well as the efforts taken and measures adopted by the assessee company for recovery of the advances have been duly noted by the tribunal. The erosion of capital leading to a fall in value of shares has been established. We are thus of the view that the conclusion of the tribunal in this regard are well founded and are not vitiated by perversity. - Decided in favour of the assessee.
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