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2015 (6) TMI 488 - ITAT KOLKATA

2015 (6) TMI 488 - ITAT KOLKATA - TMI - Profit resulted from share dealings - short term capital gains or business income - Held that:- Assessee company was originally engaged in the business of investment and financing. The assessee has converted the trading stock into investment by passing a resolution on 30.07.2004. The net value of closing stock of shares as on 30.07.2004 was at ₹ 25,97,534/- and the credit value was at ₹ 35,20,077/-. The company offered the difference of ₹ .....

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inst declared by assessee as Short term Capital Gains - Decided in favour of assessee.

Disallowance of Foreign travel expenses of Director - CIT(A) deleted addition - Held that:- since domestic and foreign travelling of Mrs. Madhurika Khaitan an executive and employee of the company was for the purpose of business promotion. Therefore, the addition made by the A.O. on this ground is not sustainable. - Decided in favour of assessee.

Addition on account of donation - CIT(A) d .....

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s. - ITA No. 1239/Kol/2012 - Dated:- 22-5-2015 - P K Bansal, AM And Mahavir Singh, JM,JJ. For the Appellant : Shri Kalyan Nath, JCIT For the Respondent : Shri Subash Agarwal, Adv. ORDER Per: Mahavir Singh: This appeal by revenue is arising out of order passed by CIT(A)-XII, Kolkata vide No. 413/CIT(A)-XII/Cir-11/09-10 dated 16.05.2012. Assessment was framed by DCIT, Cir-11, Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2005-0 .....

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ains in stea of business income." 3. Briefly stated facts are that the AO treated the sale of shares as business income as against declared by the assessee as short term capital gains. Aggrieved assessee preferred appeal before CIT(A), who deleted the addition by observing in para 4 as under: "4. I have gone through the findings of the AO. in the assessment order and submission filed by the AR. on different grounds of appeal. In the first ground where the assessee has converted the tra .....

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into investment portfolio. The net value of the closing stock of shares as on 30-07-2004 into investment portfolio. The net value of the closing stock of share as on 30-07-2004 was ₹ 2597534/-. The market value of such shares as on that date was ₹ 3520077/- and thus the company offered the difference of ₹ 922543/- for taxation. The AO did not accept the assessee s action of converting stock into investment and. therefore, he made an addition of ₹ 26,88,600/- . The AR dur .....

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s as follows: "Having heard the rival submissions and from careful perusal of the record, we find that the shares held in stock in trade were converted into investment at the book value shown in the books of account. Later on, the shares held in investment were sold and the assessee offered the capital gain accrued on the sale of shares. Admittedly, the provisions of section 45(2) of the Income Tax Act, deals with the issue of capital gain where the investment is converted into stock in tra .....

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consideration received or accruing as a result of transfer of the capital asset. While incorporation the sub-section (2) to section 45, the Legislature has not visualized the situations in other way round, where the stock in trade is to be converted into the investments and later on the investment was sold on profit. In the absence of a specific provision to deal with this type of situations, a rational formula should be worked out to determine the profits and gains on transfer of the asset. We .....

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han the value at which it was transferred from the business stock, the question of capital loss or capital gain would arise. In the absence of a specific provision to deal with the present situation, two formulas can be evolved to work out the profits and gains on transfer of the assets. One formula which has been adopted by the assessing officer i.e. difference between the book value of the shares and the market value of the shares on the date of conversion should be taken as a business income .....

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indexation from the date of conversion, should be computed as a capital gain. In the absence of a specific provision, out of these two formulas, the formula which is favourable to the assessee, should be accepted." From the above decisions of Mumbai Tribunal it is clear that assessee's case is very similar to it. Thus, this ground of appeal is squarely covered by Mumbai Tribunal's decision in the case of ACIT Vs. Bright Star Investment Pvt. Ltd. As a result the assessee s appeal on .....

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value was at ₹ 35,20,077/-. The company offered the difference of ₹ 9,22,543/- for taxation but the AO treated the entire conversion of stock into investment at ₹ 35,20,077/- as business income in view of the provisions of section 45(2) of the Act. We find that this issue is covered by the decision of Coordinate Bench of Mumbai of this ITAT in the case of ACIT Vs. Bright Star Investment Pvt. Ltd., cited supra. In view of the above, we find no infirmity in the order of CIT(A) an .....

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not incurred wholly and exclusively for the purpose of business." 6. We have heard rival submissions and gone through facts and circumstances of the case. The second ground of appeal is regarding disallowance of ₹ 2,21,117/- on account of foreign and domestic travel by Mrs. Madhurika Khaitan. The A.O. in the assessment order has given his findings that Mrs. Madhuriaka Khaitan was a nonexecutive director of the company. Therefore, expenses incurred on her domestic and foreign travels w .....

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