TMI Blog2015 (11) TMI 1284X X X X Extracts X X X X X X X X Extracts X X X X ..... investments to avoid tax on the gains. None of the Assessee’s actions in the previous year 1991-92 indicated any change in the Assessee’s intention regarding its holding in shares and debentures. The ITAT observed that there were hardly any transactions in the past and on that basis concluded that the Assessee was in substance an investment company. However, the ITAT failed to appreciate that the Assessee had consciously held itself out as a company engaged in sale and purchase of shares; it was also assessed on the income earned from business and also claimed deduction on account of business expenses incurred by the Assessee. The shares in question were, concededly, held as stock-in-trade. All that happened in the year in question is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2001 related to another Assessee namely M/s Nalwa Investments Ltd. and the common order passed by the ITAT insofar as it relates to the said appeal is not a subject matter of the present appeal. 2. This Appeal was admitted on 12th October, 2004 and the following questions of law were framed:- 1. Whether the Income Tax Appellate Tribunal was right in holding that the sale consideration received by the assessee by transfer of shares and sale of rights entitlement of Partly Convertible Debentures (PCDs) is income from capital gains and not income from business? 2. Whether the Income Tax Appellate Tribunal was right in holding that the assessee had incurred loss on sale of its entitlement to acquire partly convertible debentures and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). The Assessee reflected the shares held in JSL as stock-in-trade and had valued the same at cost or market price whichever was less. According to the Assessee, its board of directors decided to retain the shares on a long term basis and consequently passed a resolution on 4th April, 1991 that all shares held by it should be treated as investment/capital asset. 3.4 During the financial year relevant to AY 1992-93, JSL announced a rights issue of partly convertible debentures (hereafter PCDs ) of ₹ 360/- each. Out of the aforesaid sum, ₹ 120/- per PCD was payable on application and the balance ₹ 240/- was payable on allotment. One part of the PCD of the face value of ₹ 100/- was to be automatically converted int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss of ₹ 42/- per PCD on the transaction. This was computed by taking the cost of acquisition of the rights to subscribe to PCDs as a diminution in the quoted value of JSL shares; JSL shares were quoted at a cum-right price of ₹ 615/- as on 20th December, 1991 and an ex-right price of ₹ 475/- as on 24th December, 1991. It appears that the Assessee had claimed the said loss at ₹ 2,16,23,980/- (two crores sixteen lacs twenty three thousand nine hundred eighty). The Revenue, in its appeal, has mentioned the Assessee s claim of short term loss as ₹ 1,68,59,360/- (one crore sixty eight lacs fifty nine thousand three hundred sixty), however, that appears to be erroneous. 3.7 Thus, the Assessee claimed that it suff ..... X X X X Extracts X X X X X X X X Extracts X X X X
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