TMI Blog2017 (12) TMI 1174X X X X Extracts X X X X X X X X Extracts X X X X ..... Balaganesh, AM 1. This appeal of the revenue arises out of the order of the Learned Commissioner of Income Tax (Appeals) -XX , Kolkata [ in short the ld CITA] in Appeal No. 57/CIT(A)- XX/Circle-35/2013-14/Kol. dated 16-06-2014 against the order passed by the Assistant Commissioner of Income Tax, Circle-35, Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ] dated 14.03.2013 for the Asst Year 2010-11. 2. The only issue to be decided in this appeal is as to whether the ld CITA was justified in treating the transaction of conversion of shares from stock in trade to investment and its subsequent sales as long term capital gains and not business income, in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is an individual deriving income from sale of shares. The assessee maintains two sets of books of accounts. One is in the trade name Kamal Kumar Dugar Co . This account is maintained for the purpose of recording, inter alia, trading in shaes. Relevant income arising out of trading in shares is credited in the profit and loss account. Closing balance in the shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,05,35,614.99 Short Term Capital Gain 2,31,707.55 NIL 82,87,036.00 Profit from Proprietorship 9,03,25,524.76 72,59,726.14 73,62,662.21 Balance Sheet Asset Side Kamal Kumar Dugar Co (Proprietory concern) 4,06,84,560.24 (77,18,603.63) 2,41,90,059.51 Investment in Shares Debentures 99,33,725.90 4,75,41,835.90 3,62,35,585.89 3.3. The assessee also submitted the financial statements of his Proprietory concern Kamal Kumar Dugar Co. for the years ended 31.3.2008, 31.3.2009 and 31.3.2010. In the said financial statements, the assessee had declared the following:- 31.3.08 31.3.09 31.3.10 Balance Sheet Asset Side Stock in Trade 3,87,87,632.50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.5. The assessee sold 50000 shares of HFCL Infotel Ltd on different dates during the year. The total sale consideration was ₹ 3,18,91,865/- and the acquisition cost of the same were ₹ 2,13,56,252/- resulting in gain of ₹ 1,05,35,613/-. The assessee disclosed the same as long term capital gains. It was submitted that the assessee carries on the business of dealing in shares as proprietor under the trade name style of Kamal Kumar Dugar Co. , wherein the profit and loss in respect of dealing in shares from the said concern were always treated as business income and never as capital gains irrespective of the period of holding. Shares of HFCL Infotel ltd were acquired by the assessee on 2.6.2005 and recorded in the proprietorship concern and were held since then as stock in trade till 31.3.2008. Shares of the company were not listed at the time of purchase and subsequently till 31.3.2008. These were held by the assessee to be retained for a longer period and there being no value addition due to non-listing of the shares in the stock exchange, the assessee thought it fit and prudent to transfer the shares from Trading Account to Investment Account and acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of CIT vs H.Holck Larsen reported in 160 ITR 67 (SC) , that the same refers to the repeated and regular activity of buying and selling of shares and infers that the same is to be considered as business activity. Admittedly, the regular activity of buying and selling of shares which the assessee carries in his proprietorship concern are all along treated as his business income. The assessee had only transferred the shares from stock which was being held in the proprietorship concern to the investment account much earlier than the date of sale i.e about 16 months back. Further , during the course of assessment proceeding for the Asst Year 2009-10, the assessee had submitted full details of transfer of shares from Business Account to Investment Account. Further the details of investment of Kamal Kumar Dugar (assessee herein) was also submitted which included the shares in question. Even in the ITR-4, the same were also incorporated. Accordingly, it was submitted that there being nothing which prevents the assessee to transfer the stock to investment account and which have been done as apparent from the records itself on 1.4.2008 the gain arising on sale of shares of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 . On the facts and circumstances of the case and in law, the Ld . CIT ( A ) has erred in treating the transaction of conversion of shares from stock - in - trade to investment and its subsequent sales as LTCG and not business income . 2 . On the facts and circumstances of the case and in law, the Ld . CIT ( A ) erred in treating the above transaction as LTCG ignoring the fact that the real intention of the assessee behind converting the shares - from stock - in - trade to investment was only to evade tax . 3 . The appellant craves the leave to make any addition, alteration, modification of grounds at the appellate stage . 7. None appeared on behalf of the revenue when the case was called for hearing. The revenue had not even sought an adjournment before us on the date of hearing. Hence we proceed to dispose off this appeal after hearing the ld AR. The ld AR stated that the issue is squarely covered by the decision of the Hon ble Jurisdictional High Court in the case of Deeplok Financial Services Ltd vs CIT in ITA No. 1 of 2017 dated 4.4.2017, in favour of the assessee. 8. We have heard the ld AR. The facts stated hereinab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng as expressed in the dissenting view : .. When the asset is withdrawn from the stock - in - trade of the business the position in my opinion would be no different . So far as this business is concerned the asset would go out and cease to be a part of its stock - in - trade and this again would be the measure of the profit or loss as the case may be of the business qua that particular asset In Dhanuka Sons ( supra ) the same situation was contemplated where on stock transferred in investment account, the question of capital loss or capital gain, was held, would arise if such shares be disposed of at a value other than the value at which it was transferred from the business stock . We, on noticing that the Tribunal did not really hold otherwise but had held against the assessee on the point of resjudicata, had formulated the above question . Nevertheless for the reasons aforesaid we answer the question suggested by the assessee in the affirmative and in its favour . In that regard the said circular dated 29 th February, 2016 has no application because the assessee's stand was not accepted by the Revenue . So far as the fo ..... 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