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Tanvi Financial Services Pvt. Ltd. Versus Dy. Commissioner of Income-tax, Circle–2 (2) , Hyderabad

2017 (1) TMI 1088 - ITAT HYDERABAD

Sale of shares - short term capital gain OR income from business - Held that:- As the issue under consideration is materially identical to that of AY 2008-09, respectfully following the same, we direct the AO to assess the profit on sale of the shares as short term capital gains and not as income from business. Accordingly, this issue is decided in favour of the assessee. - Disallowance for loss on equity stock option - AO disallowed the same by observing that the assessee company had debite .....

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g method, it amounts to actual loss and cannot be termed as ‘provision’. The term ‘Provision” is something which cannot be ascertained as per the information available at the year end. But in this case, assessee has proper information and ascertained the loss at the year end, which is different from ‘provision’. As per the facts of the case, assessee is eligible to claim the loss on stock options and accordingly, ground raised by the assessee is allowed. - ITA No. 91/Hyd/2013 - Dated:- 18-1-2017 .....

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d securities etc. It filed its return of income for the AY 2009- 10 on 29/08/2009 admitting total income of ₹ 1,34,97,1340/-. The AO completed the assessment u/s 143(3) determining the total income at ₹ 2,19,96,480/- by making the following disallowances: i) Short term capital gain treated as business income ₹ 77,38,940/- ii) Disallowance of RCC ₹ 3,500/- iii) Disallowance of provision ₹ 84,95,856/- 3. The assessee is in appeal before us against the above disallowan .....

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8/- on account of sale of shares. The AO found that the transactions pertained to the main business of the assessee and as such there was no investment involved. By giving the following reasons, the AO assessed the income under the head income from business : i) The assessee has itself submitted during the course of assessment proceedings that the company's primary business is to provide finance against the securities besides dealing in shares & securities etc., but not investment in sha .....

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lding the shares in the annexure submitted the course of hearing . 5. Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A) and filed written submissions, which were extracted by the CIT(A) at pages 4 to 6 of his order. After considering the submissions of the assessee, the CIT(A) confirmed the action of the AO by holding that the facts and evidence point out unmistakably to the fact that the entire transaction was organized so as to obtain the quick profits throug .....

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d/2012, order dated 25/03/2013, a copy of which has been filed in the paper book at pages 13 to 19. 8. Ld. DR conceded to the submissions of the AR of the assessee. 9. Considered the rival submissions and perused the material facts on record. Similar issue came up for consideration before the Tribunal in assessee s own for AY 2008-09 (supra), wherein the coordinate bench has held as under: 8. We have heard both the parties and perused the record as well as gone through the orders of the authorit .....

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record to indicate that they had indulged in purchase and sale of shares in the earlier occasions. What weighed with the lower authorities was the frequency of purchase and sales. The frequency of purchase and sale alone cannot be the criterion. As explained by the Assessee bulk of shares were obtained from initial public offer and the sale of these shares were spread over more than one transaction. Hence sale of the same shares on more than one day cannot be considered as frequent sales. Whate .....

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g activity. Hence we direct the AO to assess the profit on sale of the shares of ₹ 1,19,80,047/- as short term capital gains and not as income from business. Further, we wish to make it clear that it is not our opinion that in every case income earned from sale of shares is to be treated as capital gain. It all depends upon the facts and circumstances of respective case. We also make it clear that our finding in earlier paras is relating to this assessment year only and the assessee cannot .....

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ity stock option amounting to ₹ 84,95,856/-, the AO disallowed the same by observing that the assessee company had debited to P&L A/c a provision for loss on equity stock option/index option, the assessee ought to have added back the same to the income returned which the assessee failed to do so. 11. Before the CIT(A), the assessee stated that actually it was holding various stock options and at the end of the year it valued stock options at cost or market value whichever is less. This .....

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3. Aggrieved by the order of the CIT(A), the assessee is in appeal before us. 14. Ld. AR submitted that as per assessee s accounting policy, loss on equity stock option of ₹ 84,95,856/- was made in the books of account i.e. the assessee valued its closing stock at cost or market value whichever is lower as per the accounting policy and has accounted for the loss in the value of closing stock. This value has been taken as opening stock value in the next AY i.e. AY 2010-11. He submitted that .....

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and the same was explained vide letter dated 21/12/2011 before the revenue authorities. The AR, therefore, requested the bench to consider the said submissions and delete the disallowance made on this count. 15. Ld. DR relied on the orders of revenue authorities. 16. Considered the rival submissions and perused the material facts on record. We have noticed that the assessee has submitted additional evidence due to the fact that ld. CIT(A) has observed in his order that the assessee has not subst .....

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