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2016 (8) TMI 266 - GUJARAT HIGH COURT

2016 (8) TMI 266 - GUJARAT HIGH COURT - [2016] 388 ITR 366 - Revision u/s 263 - Commissioner had held that the shares sold were stock-in-trade and not investment - Held that:- In the present case, the shares and securities were acquired much earlier and all throughout they were treated as stockintrade. It was only on 31.03.1993, viz. when Resolution was passed by the Board of Directors of the assessee company, that they were converted into investment. Therefore, for the purpose of the Act, the r .....

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MR. G.R.UDHWANI, JJ. FOR THE APPELLANT : MR JP SHAH, ADVOCATE, MR MANISH J SHAH, ADVOCATE FOR THE OPPONENT : MR M.R. BHATT, SENIOR ADVOCATE WITH MR KARAN SANGHANI, ADVOCATE AND MRS MAUNA M BHATT, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. This Tax Appeal under Section 260A of the Incometax Act, 1961 is filed against the order dated 29.08.2005 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench C (for short, the Tribunal ) in ITA No.2463/Ahd/1998 raising the follo .....

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f trading in cement, paper, AC sheets, pipes, etc. In the Assessment Year 1994-1995, the assessee sold certain shares and claimed the same as capital gains, on which indexing benefit was allowed by the Assessing Officer. Till 31.03.1993 these shares were held as stockintrade and they were converted into investment by Resolution dated 31.03.1993. Therefore, it was claimed that the shares were investment during the Assessment Year 1994-1995 and the sale thereof was liable to capital gain. The Asse .....

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e. Thereafter, vide order dated 30.11.1998, the CIT(A) set aside the assessment and issued direction to the Assessing Officer to frame the assessment afresh. 4. Being aggrieved by the aforesaid order, the assessee preferred appeal before the Tribunal. However, the Tribunal dismissed the appeal filed by the assessee, vide order dated 29.08.2005. Hence, this Tax Appeal. 5. Mr. J.P. Shah, learned counsel appearing for the appellantassessee, submitted that the basis of the Notice issued by CIT(A) wa .....

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bhai Patel v. Commissioner of Incometax, [1971] 81 ITR 446 wherein, it has been held that the only circumstance which must be satisfied in order to attract the charge to tax on capital gains u/s.45 is that the property transferred must be a capital asset at the date of transfer and it is not necessary that it should have been a capital asset on the date of acquisition by the assessee. It was further held that where the property transferred was not a capital asset on the date of its acquisition b .....

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as completely germane in the eyes of law. It was, therefore, submitted that the entire proceedings conducted by the CIT(A), as confirmed by the Tribunal, is erroneous and deserves to be quashed and set aside. 5.3 In support of his submissions, reliance is placed on the following decisions: (A) In Malabar Industrial Co. Ltd. v. Commissioner of Incometax, [2000] 243 ITR 83, the Apex Court held that the phrase prejudicial to the interests of the Revenue has to be read in conjunction with an erroneo .....

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s of the Revenue, unless the view taken by the Incometax Officer is unsustainable in law. (B) In Commissioner of Incometax v. Max India Ltd., [2007] 295 ITR 282 (SC), the Apex Court took a similar view. Similar view was taken by this Court in a decision rendered in the case of Commissioner of Incometax v. Nirma Chemicals Works P. Ltd., [2009] 309 ITR 67. In Commissioner of Incometax v. Vodafone Essar South Ltd., [2012] 28 taxmann.com 273 (Delhi), the High Court of Delhi also took similar view. 6 .....

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6.1 Learned Senior Advocate contended that the aforesaid act of the assessee shows that shares were held as stockintrade and that claim of capital gain was made to derive the tax benefit. In the proceedings initiated u/s.263 of the Act, the CIT(A) pointed out the aforesaid inconsistency in the Trading Account and claim of the assessee. Hence, the CIT(A) had not committed any error in exercising powers u/s.263 of the Act and the Tribunal was also justified in dismissing the appeal filed by the as .....

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of the Incometax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. It was, therefore, submitted that both the CIT(A) and the Tribunal were justified in passing the impugned orders. 7. We have heard learned counsel Mr. J.P. Shah appearing on behalf of the assessee and learned Senior Advocate Mr. M.R. Bhatt appearing on behalf of the Revenue. Both the questions are interconnected and therefore, we shall decide them t .....

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ver, the order of CIT(A) clearly indicated the treatment of sale as regular profits or business profits and / or short terms capital gains. The CIT(A) pointed out the inconsistency in the Trading and Profit & Loss Account of the assessee Company and its claim. Therefore, in our considered opinion, it cannot be said that the order passed by the CIT(A) u/s.263 of Act was erroneous or bad in law or was different from the contents of the Notice issued. 9. In Rachhodbhai Bhaijibhai Patel s case ( .....

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