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TMI Blog2020 (6) TMI 433X X X X Extracts X X X X X X X X Extracts X X X X ..... s to Assessment year 2005-06. Since, common question of law arise for consideration in these appeals, they were heard analogously and are being decided by this common judgment. The appeals were admitted by a bench of this Court vide order dated 03.08.2011 on following substantial question of law: (i) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was right in law in holding that the income arising on sale of shares held as capital asset after conversion from stock in trade as business income and not as capital gains? 2. For the facility of reference, facts from I.T.A.No.70/2011 are being referred to. The assessee is a non banking financial corporation engaged in the activity of investment in shares. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer was directed to grant the relief after verification. Accordingly, the appeal was partly allowed. 3. Being aggrieved, the assessee filed an appeal before the Income Tax Appellate Tribunal. The tribunal vide order dated 07.10.2010 inter alia held that assessee had acquired certain shares under portfolio management scheme and those shares were treated by the assessee and accepted by the department as stock in trade for the Assessment years 2003-04 and 2004- 05. It was further held that assessee had changed the character of its asset from stock in trade to investments. It was further held that surplus had arisen in the course of conversion of aforesaid shares and therefore, stock in trade is a business asset and any income arising on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hird party is involved. It is also submitted that assessee had converted stock in trade of shares into investment during Assessment year 2005-06. The tribunal by an order dated 07.06.2016 passed in ITA Nos.1450 and 1451 (B)/2015 decided on 07.06.2016 held that shares held by the appellant as investments is liable to be taxed as capital gain and not as business income. The aforesaid order was not assailed by the revenue in an appeal before this court and therefore, the aforesaid issue has attained finality. It is also submitted that sale of shares held in stock in trade converted into investments being capital gains is not a business income and the determination whether the property is a capital asset or not has to be made only at the time o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be considered as business income and therefore, the order of the tribunal needs modification to the aforesaid extent. It is urged that provisions of Section 45(2) of the Act have to be taken into account. In support of aforesaid submissions, reliance has been placed on the decisions in 'COMMISSIONER OF INCOME-TAX, CHENNAI VS. ESSORPE HOLDINGS (P.) LTD.', (2017) 83 TAXMANN.COM 280 (MADRAS) and 'COMMISSIONER OF INCOME-TAX, DELHI VS. ABHINANDAN INVESTMENT LTD.', (2015) 63 TAXMANN.COM 263 (DELHI). It is also submitted that in PAVITHRA COMMERCIAL LTD., supra and YATISH TRADING CO. LTD., it was found that no questions of law arise for consideration. Therefore, the aforesaid decisions have no value as precedents. 6. We have cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed comes within the letter of law he must be taxed, however, great hardship may appear to the judicial mind to be. [SEE: PRINCIPLES OF STATUTORY INTERPRETATION BY JUSTICE G.P.SINGH, PAGE 879, 14TH EDITION]. 8. In the instant case, the relevant extract of memorandum to Finance Bill, 2018 reads as under: "Section 45 of the Act, inter alia provides that capital gains arising from a conversion of capital asset into stock in trade shall be chargeable to tax. However, in cases where the stock in trade is converted into, or treated as capital asset, the existing law does not provide for its taxability. In order to provide symmetrical treatment and discourage the practice of deferring the tax payment by converting the investory into capital ..... X X X X Extracts X X X X X X X X Extracts X X X X
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