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2018 (11) TMI 878 - HC - Income TaxNature of loss - capital loss or Loss revenue loss - incurred from the transactions relating to the mutual fund units - whether there was evidence available on record to indicate that the intention of the assessee was to treat the holding as stock-in-trade? - Held that:- It is clear that the assessee has stated that they are a financial service company rendering financial advisory and syndication services. Apart from that, the assessee is also trading in shares, units of mutual funds, etc. Memorandum of Association of the Company authorizes the Company to deal in shares and services vide its main objects clause. Further, it is stated that as authorized, the assessee had made mutual funds units during the financial year 2000-01 and sold the units during the same year. The trading in such units was done in the ordinary course of its business and as such revenue in nature. It does not amount to capital asset to be attracting Capital Gain Tax. Further, the assessee stated that the company has treated the transaction as revenue transaction and debited the loss incurred to profit and loss account as revenue expenditure and more particularly, in the earlier financial year also i.e. 2000-01, transaction was treated as revenue expenditure and the same was allowed by the AO. We find that the Tribunal erred in coming to a conclusion that there was no evidence available on record to indicate that the intention of the assessee was to treat the holding as stock-in-trade. AO came to the conclusion that it is a capital investment, because, the assessee was a financial services company. Memorandum of Association of the Company authorised to deal in shares and services. Furthermore, for all the previous assessment years and the subsequent assessment years, similar transactions have been held to be revenue in nature and for the assessment year 2006-07, AO did not agree with the assessee. CIT-A after taking into consideration of the Memorandum of Association of the Company, held that the assessee had acquired equity shares, which it held as stock-in-trade and out of which, a portion was sold incurring a loss which was accounted for as business loss. It held that the method of accounting and the principle of accounting for loss or gains from investments or stock-in-trade have been consistently and regularly followed by the assessee and accordingly, the claim of the assessee with regard to loss arising from trading in shares is to be allowed as a business loss as claimed by the assessee. - Decided in favour of the Assessee
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