TMI Blog2002 (8) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee in respect of the shares and, accordingly, there has neither been purchases nor sales in shares in the year under appeal. The assessee is also holding some shares as investments from which dividend has been received. Since there was no trading in shares, no trading account was drawn in respect of such activity. The assessee, however, revalued the stock of shares on the basis of cost or market price whichever was lower and claimed the loss on account of fall in the value of shares. The Assessing Officer disallowed the loss on the ground that there was no occasion for valuation of the stock in view of no activity in the 'trading of shares' in the year under appeal. The CIT(A) has allowed the loss on the ground that the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the shares and any businessman consciously does not purchase or sell shares, there has got to be presumption of suspension of business rather than a temporary lull in business. Price fluctuation of shares is inhere. It in trading of shares. Goldsmiths do not stop business of selling merely because the price of gold fluctuates. Foreign Exchange Traders do not stop buying and selling of Foreign Exchange by reason of price fluctuations. Price fluctuation is manifested in the nature of business. Therefore, the claim of the assessee that there was temporary lull in business of trading of shares is not acceptable. Considering the facts and circum stances of this case in the light of the material on record, I am of the considered view that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on the activities of purchase and sale have got to be determined. In determining the profits from the trading activities, it is accepted principle that the value of the stock has got to be taken into account. For valuation of closing stock, different methods are recognized and one of the recognized methods is the cost or market price whichever is lower. There is no dispute on that. However, one has to consider as to whether there is any occasion for determination of profits in respect of no activities carried on by the assessee. It is well known that in drawing balance sheet at the close of the year, the closing stock is transferred to the balance sheet as 'current asset'. When there are trading activities in the following year, such curr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me from stocks held as investments to stock-in-trade. In order to get benefit of market fall in prices, assessee would find it convenient and beneficial to transfer stocks from investments into stock-in-trade and claim the difference as loss notwithstanding the fact that no transaction takes place in trading activity. As pointed out earlier the valuation of closing stock on the basis of cost or market price is acceptable not merely because of market fluctuation but because of event of purchase and/or sale of shares and to work out its impact on the closing stock. In the absence of any activity in trading in respect of a suspended business, the stock is not to be revalued and the loss cannot be claimed on the basis of fall in prices. The los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... keeping the business alive. Therefore, in my view, in the absence of any trading activity in shares, opening stock of the year will be the closing stock of the year without any adjustment an account of market fluctuation. The CIT(A) was, therefore, not justified in deleting the addition of Rs. 36,200. The addition of Rs. 36,200 is, accordingly, restored. The assessee shall, however, get the benefit of the enhanced value in the opening stock of the subsequent year. This addition is, accordingly, restored with the condition that necessary adjustment is made by the Assessing Officer in the subsequent year on the basis of the addition sustained in the year under appeal. 9. and 10. [These pares are not reproduced here as they involve minor i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
