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2015 (6) TMI 943 - ITAT AHMEDABAD

2015 (6) TMI 943 - ITAT AHMEDABAD - TMI - Treatment to the losses on sale of share as "capital loss" - Held that:- From the perusal of the Balance sheet as on 31st March, 2007, it is seen that the shares of RPG Life Sciences Ltd of ₹ 2.37 crores are reflected under the head of "investment" and are valued at cost which is also in line with the accounting policies (as reflected in the annual accounts and placed at page 29 of the paper book,). On the other hand, if the Assessee had treated th .....

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quired to follow certain guidelines, procedures prescribed under the Accounting Standards when there is transfer from "investment" to stock in trade. Further, it is also seen that under clause 12A of the Tax Audit Report for A.Y. 2008-09 which is placed at page 84, against the column with respect to particulars of capital asset converted into stock in trade, the auditor has mentioned as Nil meaning thereby that auditor has also certified that there is no conversion of capital asset to stock in t .....

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investment in the Accounting Standard, it is stated that it has to be valued at lower of cost and fair value whereas on the other hand, the Assessee has in its books treated the shares as investment and accordingly valued the shares at cost and therefore its contention of holding the shares at stock in trade is also not supported by the method of accounting and its valuation. Before us, ld. A.R. has also not placed any material on record in support of its contention that for the sake of identifi .....

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mpany stated to be engaged in the business of trading in shares. Assessee filed its return of income for A.Y. 2008-09 on 25.09.2008 declaring total loss of ₹ 80,03,910/-. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 20.10.2010 and the total income was determined at ₹ 8,08,300/-. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who granted partial relief to the Assessee. Aggrieved by the .....

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e contention of the appellant that ; (i) The appellant s main activity is purchase and sale of shares. (ii) The shares of particular scrip were shown as investment instead of as stock in trade only for the convenience of identification as the said share were locked in for trading for a period of one year. (iii) The said shares were meant for trading only. 4. Before us, ld. A.R. submitted that though various grounds have been raised but the only issue is with respect to treating the losses on sal .....

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ss loss. On perusing the details furnished by the Assessee, A.O noticed that 1,50,000 equity shares were allotted to the Assessee @ 158 per share during the F.Y. 2005-06 and the shares was held as investments and was also reflected as investments in the audit balance sheet for A.Y. 2005-06 & 2006-07. The submission of the Assessee that it had converted the shares into stock in trade as on 02.04.2007 was also not found acceptable to the A.O for the reason that in the tax audit report submitte .....

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and 74(1) of the Act. He accordingly disallowed the adjustment of loss against the business income. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who upheld the order of A.O by holding as under:- 3.4 Decision I have carefully perused the assessment order and the submissions given by the appellant. From the perusal of assessment order and the written submission given by the A. O., the following facts come to light. (i) The appellant is maintaining two portfolio in .....

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ue and were locked in for trading for one year. The appellant has submitted that the shares of RPG Life Sciences were intended to be a trading scrip and not as investment. For the sake of identification, the shares were placed in the investment account. The submission of the appellant is not acceptable as it is an afterthought. The facts and the circumstances show that the intention of the appellant was to purchase the shares as an investment. The claim that these were put in the investment port .....

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. Therefore, the A. O. was justified in treating the loss arising out of the sale of these shares as capital loss and not as trading loss. The ground of appeal is, therefore, dismissed. 4. The fifth ground of appeal is regarding set off of carried forward business loss. Perusal of the assessment order shows that the A. O. has not given any finding regarding non-allowance of set off of. carry forward business loss. However, he is directed to verify the records and allow the set off of carry forwa .....

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period. On 02.04.2007 i.e. at the end of lock in period of 1 year, Assessee transferred the shares from "investment" account to regular "stock in trade" account and therefore it treated the aforesaid shares at par with other shares being part of stock in trade. He further submitted that since the shares were sold in the normal course of business, the resultant loss was adjusted against the "business income" from trading of shares and the mere accounting treatment in .....

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ere allotted to the Assessee on 23.02.2006. From the perusal of the Balance sheet as on 31st March, 2007, it is seen that the shares of RPG Life Sciences Ltd of ₹ 2.37 crores are reflected under the head of "investment" and are valued at cost which is also in line with the accounting policies (as reflected in the annual accounts and placed at page 29 of the paper book,). On the other hand, if the Assessee had treated the shares of RPG Life Sciences Ltd. as part of stock in trade, .....

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der the Accounting Standards when there is transfer from "investment" to stock in trade. Further, it is also seen that under clause 12A of the Tax Audit Report for A.Y. 2008-09 which is placed at page 84, against the column with respect to particulars of capital asset converted into stock in trade, the auditor has mentioned as Nil meaning thereby that auditor has also certified that there is no conversion of capital asset to stock in trade. The submission of the Assessee that for the p .....

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