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TMI Blog2024 (12) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... (hereafter the learned ITAT) in ITA No. 3843/Del/2010, in respect of the assessment year (AY) 2006-07. 2. The Assessee has projected the following questions of law for consideration of the Court: A. Whether the ITAT's order deciding grounds 2 & 3 raised before it in the Assessee's appeal is a speaking order? B. Whether the ITAT erred in holding that profit on sale of 'Held To Maturity' category securities in a sum of Rs. 27,27,44,102 was to be taxed as business income and not as capital gain? C. Whether the ascertainment of scale and frequency of trading transactions for the purpose of determining whether they constitute business income or capital gain is to be calibrated on the basis of a person's scale of operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o note that the Assessee had, during the said proceedings, also raised an alternate plea that in the event, the profits from sale/redemption of HTM securities is charged to tax under the head 'income from business and profession', the losses suffered by it should also be allowed as deduction for computation of income under the head 'income from business and profession'. 6. However, the Assessee's claim in this regard was rejected on the ground that the Assessee had failed to substantiate its claim for the loss incurred as it had not furnished the details of cost of acquisition and the selling price. The relevant extract of the impugned order is set out below: "15. We find that the learned AR of the assessee could not controvert the findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity category security is converted into Available for Sale, it will suffer two incidence of tax on the date of sale. The first incidence of tax would be the result of application of Section 45 (2) which provides for once capital asset is converted into stock-in-trade, capital gain would be taxable and sale consideration would be the market value on the date of conversion. Once the capital asset is converted into stock-in-trade, it will suffer another incidence of tax under section 28 as normal business income where the cost of acquisition will be the cost of security and the sale consideration will be sale price, the difference between sale price and cost price equal business income. According to the AO, in this case, the assessee has fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section(1), the profits or gains arising from the transfer by way of conversion by the owner of a capital asset into, or its treatment by him as stock-in-trade of a business carried on by him shall be chargeable to income tax as his income of the previous year in which such stock-in-trade is sold or otherwise transferred by him and for the purpose of section 48, the fair market value of the asset on the date of such conversion or treatment shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset." A plain look at the above provisions makes it clear that it is a deeming provision which creates a legal fiction for the purpose of taxing the capital gain. There may not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te proceedings that the appellant has suffered actual loss. In view of the above discussion, I do not find any infirmity in the action of the AO in disallowing the business loss of Rs. 10,06,04,870/- claimed on account of conversion of securities into stock-in-trade. Therefore, this ground of appeal is rejected." 20. Before us, the AR of the assessee reiterated the submissions made before the learned CIT(A). On the other hand, the learned DR supported the orders of the authorities below. 21. After hearing the rival submissions and perusing the orders of the lower authorities and materials available on record. We find that the Assessing Officer as well as the learned CIT(A) has disallowed the deduction for the loss of Rs. 10,06,04,870/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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