TMI Blog2012 (3) TMI 578X X X X Extracts X X X X X X X X Extracts X X X X ..... d in directing to treat the income from share trading as capital gains and ignoring the fact that the resolution passed by the Board of Directors of the assessee company for converting the stock into investment was purposely to hoodwink the revenue and to benefit itself from lower tax regime, even when there was no change in the trading pattern of the assessee company from earlier and subsequent years. 2. On the facts and circumstances of the case and in law, the ld CIT(A) erred in deleting the disallowance of ₹ 8,25,617 made in respect of VSAT, leaseline charges and transaction charges without realizing the fact that these were composite charges for professional and technical services rendered by the exchange to its members and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgeted appreciation has been reached within a short span of time and as a prudent investor the company has encashed its profits. The markets have also been highly volatile and there have been deep downswings periodically and sometimes investments have been liquidated at a loss. The company in its return of income has offered gains on investments under the head short term capital gain or long term capital gain depending on period of holding. The company has also earned substantial dividends during the year amounting to ₹ 15,78,355. Necessary resolution passed by board of directors is reproduced as under: the Board of directors discussed the advantage of converting all the stocks held by the company to investments mainly due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amples for making the tabulated trading pattern. The AO thus came to the conclusion that the conversion of shares from stock in trade to investment was only a ploy to get into the lower tax rates, if treated as investment on long term. The AO, thus denied the benefit of conversion to the assessee. 4. The assessee has also debited VSAT charges, leaseline charges and transaction charges of ₹ 8,25,617. These charges are payable to stock exchange and lease line operator on account of services provided by it with regard to transactions in securities through the exchange. During the course of assessment proceedings, the Assessing Officer referring to the provisions of section 40(ia) of the Act asked the assessee to explain as to why the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15.6.2007, wherein, the Board accepts that the tax payers can have two portfolios, as under: CBDT also wishes to emphasis that it is possible for a tax payer to have two portfolios, i.e. an investment portfolio comprising of securities which are to be treated as capital assets and a trading portfolio comprising of stock in trade which are to be treated as trading assets. Where an assessee has two portfolios, the assessee may have income under both heads i.e. capital gains as well as business income. 5. The CIT(A) while giving his findings accepts that the assessee company has utilized its own funds in the investments as he found that investments in the balance sheet were to the tune of ₹ 7.61 cores against share capital and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f portfolios, but in the current year, proposed to change, when the law permits it, and the Board also accepts the factum of assessee s having distinct portfolios, which the assessee in the present case had been maintaining. The change proposed by the Board of Directors to convert the stock in trade to investment was approved vide an appropriate resolution as per Companies Act, 1956. As a consequence of this conversion, the assessee has also paid taxes during the course of assessment proceedings. The Bench enquired from the assessee company as to what was the treatment given by the AO on the new facts in subsequent year, the assessee company informed the Bench that the AO has accepted the change and the AO has not made any disallowance on t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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