TMI Blog2015 (10) TMI 526X X X X Extracts X X X X X X X X Extracts X X X X ..... determined as per section 45(2) of the I.T. act. Section 45(2) clearly mandates that the chargeability will be determined in the year in which the converted stock in trade is sold and not in the year in which it is actually converted into stock in trade. Therefore, ld. CIT(A) has rightly observed that the issue is premature at this stage and, therefore, he should have dismissed the assessee’s ground of appeal instead of allowing the same because in the year under consideration the assessee could not treat it as a short term capital loss to be carried forward to subsequent years. The short term capital loss/ gain will also be incurred in the year in which the transfer takes place and the computation will have to be made accordingly. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 9,56,71,658/-, inter alia, making following adjustments/ disallowances: (i) Disallowance on a/c of loss on sale of gold ₹ 8,08,330/- (ii) Disallowance u/s 14A ₹ 86,76,130/- (iii) Disallowance u/s 40A(3) ₹ 6,24,29,244/- 2.1. In appeal, ld. CIT(A) partly allowed the assessee s appeal. 2.2. Being aggrieved with the order of ld. CIT(A), the department is in appeal before us and has taken following grounds of appeal: 1. On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the disallowance of ₹ 6,24,29,24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Mazgaon Dock Ltd. Vs. CIT 34 ITR 368, concluded that it was an adventure in nature of trade which was to be considered u/s 28. He, accordingly, held that the loss of ₹ 8,08,330/- was assessable as business loss and not as short term capital gain. Since assessee had admittedly made the purchase in cash, the assessing officer invoked section 40A(3) and made a disallowance of ₹ 6,24,29,244/-. 3.1. Before ld. CIT(A) it was clarified that the gold had been purchased in February 2008 as capital asset on different dates. The same was duly shown in the balance-sheet and in the wealth-tax return and the assessee had also paid wealth-tax thereon. It was also pointed out that the assessee s case for A.Y. 2008-09 had undergone scrutiny ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee s wealth-tax return. Therefore, there was no evidence with the assessing officer to take a contrary view. The purchase and sale bills of gold as produced before ld. CIT(A) showed that the purchases and sales were made at prevalent market price of the gold. We, therefore, do not find any reason to interfere with the order of ld. CIT(A) on the issue in question. Ground nos. 1 2 are dismissed. 5. Apropos ground no. 3, brief facts of the case are that assessee was required to explain as to why conversion of investment in shares into stock in trade should not be considered as colourable device so as to make it eligible for setting off against other income because if it would have been sold as an investment, then the assessee would h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit/ loss on conversion of investment as stock-in-trade on 2-5-2008 by taking NAV of the units of UTI mutual funds as on that date did not arise in the current year u/s 45(2). He, accordingly, held that issue was premature and in the absence of any short-term capital loss taking place in the current year, no adjudication on the issue of its carry forward was called for. However, ld. CIT(A) allowed the ground raised by assessee. 6. We have considered the submissions of both the parties and perused the record of the case. The facts are not disputed. The AO had disallowed the assessee s claim on the ground that it was a colourable device for reducing the tax liability. Ld. CIT(A) has not commented specifically on this aspect but he has hel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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