TMI Blog2023 (10) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... venue are dismissed. - Shri Chandra Mohan Garg, Judicial Member And Dr. B.R.R. Kumar, Accountant Member For the Revenue : Shri Krishna Kr. Mishra, Sr. DR For the Assessee : Shri Gaurav Jain, Advocate And Shri Sudhanshu Ray, Advocate ORDER PER C.M. GARG, J.M. The appeal and cross objection were filed by the Revenue and assessee respectively against the order of the Ld. Commissioner of Income Tax (Appeals)-2, Ludhiana dated 30.10.2018 for AY 2012-13. The grounds raised by the Revenue are as follows: 1. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in directing the AO to treat the income of the assessee from sale of shares/securities/PMS/Mutual Funds etc and income under the head Capital Gains instead of Income from Business 1.a) Whether the Ld CIT(A) was justified in ignoring the decision dated 04.2014 of jurisdictional High Court in ITA Nos. 93, 226 227 of 2012 in assessee's own case for AY 2007-08 wherein the Hon'ble High Court has held that income of the assessee from sale of shares/securities/mutual funds by the assessee is chargeable to tax as Business Income as sole activity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s own case. He further submitted that the Hon ble Jurisdictional High Court has allowed appeals of Revenue reversing the conclusion drawn by the Ld.CIT(A) and the Tribunal held that the impugned income has to be treated as business income. 3. Replying to the above noted contentions of Ld. Sr. DR and supporting the first appellate order the Ld. Counsel for the assessee submitted that in the case before the Hon ble Punjab Haryana High Court the issue was regarding income from dealing in mutual funds but in the present case the issue involve is income accrued from sale of shares which were held by the assessee as investment and also shown as investments in the Books of Accounts and Balance sheet as on 31.03.2012. Further drawing our attention towards para 26 27 of the Judgment of Hon ble High Court of Punjab Haryana the Ld. Counsel submitted that the Hon ble High Court had decided the issue of income on sale of Tata Mutual Funds (Dividend Plan) as business income but in the present case from the submissions of assessee noted by the Ld.CIT(A) in para 6.1 reveals that the impugned income was accrued to the assessee out of sale of investment in shares, which the assessee was hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icating the income on sale of Tata Mutual Funds (Dividend Plan) as income from 'short term capital gains' merely on the ground that the units of mutual funds were not freely tradable and thus, such investment was in non-tradeable commodity. In fact, in the present case, it has been amply proved that the business of the assessee is to make profits by virtue of investments in shares and securities etc. Merely because there is single transaction or that such investment was in not freely tradeable commodity, does not change the profit intent of the assessee who is in the business of investments only. Therefore, the investment made by the assessee was rightly treated as stock- in-trade and revenue generated to the tune of Rs. 1,24,70,700/- was correctly assessed as business income by the AO. Rightly, no adjustment for the balance forward on account of short term capital loss of assessment year 2004-05 to the tune of Rs. 1,93,776/- and for the assessment year 2005-06 to the tune of Rs. 2,49,934/-, had been allowed by him. 28. So far as ITA Nos.226 and 227 of 2012 are concerned, unlike case of ITA No.39 of 2012, activities of the assessee in these appeals are so frequent and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alance sheet, which is duly audited and filed with the office of Registrar of the Companies as well as Reserve Bank of India. 3. The assessee company is not having any investment in the equity shares of other than group companies as on 31/3/2012. 4. It is a settled law that the company can have the dual portfolio of investment i.e. as investment as well as stock-in-trade. The investment always depends upon the intention and for the purpose for making the investment. 5. Reference may kindly be made to the Circular issued by CBDT for distinction between the business income and capital gain . The assessee company clearly falls under the head capital gain . The Ld. AO has not followed the Circular of CBDT which is binding in nature. 6. Nothing has been brought on record to show that the assessee company has converted capital investment into stock-in-trade. 7. There is no day to day transaction of sale purchase of investments/mutual funds nor any intra day transactions have been made. 8. These investments has always been shown as investment and valued at cost as per AS-13. 9. Prior to AY 2006-07, it has always been accepted as investment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernatively That the Ld. ACIT has wrongly failed to allow the expenses debited to profit and loss account while treating the Long Term Capital Gain as Business Income 1. During the year, the assessee has incurred an expenditure of Rs. 782520175/- as follows: The detail of these expenses are enclosed. 2. The assessee company had not claimed these expenses in the computation of taxable income, as the revenue earned from investments were shown under the head Capital Gain . The assessee company still maintains to treat the profit under the head Capital Gain . In case, though not conceding the profit is held by your honour as Business Income by following the Hon ble High Court decision, the expenses may be allowed. 3. As already submitted by the assessee during the assessment proceedings, the finance cost of Rs. 758649615/- have been incurred for the purpose of purchase of shares of Hero MotoCorp. 4. If it is held that Capital Gain shown by the company is Business Income then the expenditure incurred may be allowed. Reference be made to the order of Hon ble ITAT Chandigarh Bench in the case of ACIT Vs. Gaurav Munjal in ITA No.740/2012 date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of AY 2012-13 (iv) Copy of Assessment Order of AY 2007-08. (v) Copy of Order of CIT(A) of AY 2007-08 (vi) Copy of Order of ITAT of AY 2007-08 The Ld. AO while framing the assessment ahs considered the profit at Rs. 40000004/- instead of determining the loss at Rs. 167382883/-. A calculation of Capital Gain, investment wise, is enclosed. In view of the above, it is therefore prayed the correct figure of loss of Rs. 167382883/- be directed to be considered instead of profit of Rs. 40000004/- Written submissions dated 02.09.2017 In continuation of my previous Appeal Notes where the assessee company had filed all the documents relating to AY 2007-08 vide letter dated 22/8/2015. In AY 2007-08, the company had made provision of diminution in value of shares as per requirement of Companies Act at Rs. 20,73,82,387/-. This amount was debited to Profit Loss Account accordingly the cost of shares were reduced. The company had not claimed nor allowed the diminution in the value of shares as expenditure in AY 2007-08. The provisions of Section 43 of Income Tax Act read as under: In sections 28 to 41 and in this section, unless t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the assessee company had always treated shares/securities/PMS/mutual funds as an investment in its books of account and not as stock-in-trade. I am also of the opinion that as Circular No. 6/2016 dated 29.02.2016 has been issued by tie CBDT, New Delhi to reduce litigation and uniformity of approach, it should have retrospective effect. As per this Circular, the income from the sale and purchase of shares is to be treated as long/short term capital gain as the assessee company has shown investment in shares/securities, which have been purchased sold, in its balance sheet as investment and not as stock in trade. I am also of the opinion that the operation of this circular should be retrospective otherwise the purpose for issuing this circular will be defeated. Under such circumstances and keeping in view the guidelines issued by the CBDT vide Circular No. 6 dated 29.02.2016, the action of the Assessing Officer in treating income from the sale and purchase of shares/securities/PMS/mutual funds etc. as business income instead of long term capital gains is negated. The Assessing Officer is, therefore, directed to treat the income from sale and purchase of shares/securities/PMS/Mutua ..... X X X X Extracts X X X X X X X X Extracts X X X X
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