TMI Blog1998 (5) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer had erred in framing the assessment inasmuch as deduction claimed under section 48(2) amounting to Rs. 92,651 on sale of shares has been wrongly allowed treating the income as long-term capital gains. The Commissioner accordingly issued a show-cause notice on 25-1-1996 calling upon the assessee to show cause as to why income on sale of shares treated as capital asset be not modified treating the shares as stock-in-trade and disallowing the excess deduction of Rs. 92,651 claimed and allowed under section 48(2). The assessee filed its representation on Jan. 25, 1996 challenging the legality of the proceedings under section 263 on the ground that the assessee, an investment company, is engaged in investment as well as trading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e books of account. According to the Id. counsel, there has not been any change in the holding pattern ever since inception and no stock has been converted into investment or vice versa. Referring to page 11 of the paper-book, the Id. counsel pointed out that investment portfolio as on 31 -3-1991 has been reflected at Rs. 6,71,634 whereas stock-in-trade is reflected at Rs. 7,61.136. The Id. counsel further added that during the year relevant for assessment year 1991-92 under consideration, the assessee sold 8960 shares of M/s. Max India Ltd. and 1000 shares of M/s. Montari Industries Ltd. for an aggregate sale price of Rs. 5,68,680 and Rs. 3,00,780 respectively. Both the shares were duly reflected in investment portfolio maintained by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R., on the other hand, supporting the order of the Commissioner argued that the principles laid down by the Hon'ble Supreme Court in the case of G. Venkataswami Naidu Co. v. CIT [1959] 35 ITR 594, are squarely applicable to the case of the assessee and since the shares of M/s. Montari Industries Ltd. and M/s. Max India Ltd. have been purchased with an intention to make profit, the income from the sale of shares is liable to be assessed as business income and not as capital gains. The Id. D.R. further placed reliance on the following decisions in support of his submissions :- (i) CIT v. Sitaram Agarwalla Bros. [1990] 186 ITR 385 / [1989] 45 Taxman 206 (Cal.), (ii) Swarup Vegetable Products Industries Ltd. (No. 1) v. CIT [1991] 187 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activity involving sale and purchase of shares. A clear demarcation has been maintained between the shares held as stock-in-trade and the shares held as capital investments and never in the past the demarcation has been doubted or disturbed by the tax authorities. Separate accounts/entries are recorded in respect of the two different categories of assets in the books of account maintained by the company. In the earlier assessment years, namely, assessment years 1987-88, 1989-90 and 1990-91, surplus realised by the assessee on sale of investment shares reflected in investment portfolio have been disclosed by the assessee as capital gains which have been assessed by the Assessing Officer accordingly. No fresh facts or evidence has been broug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the assessee in recording the purchases in a separate investment portfolio account. It has been held by the Hon'ble Supreme Court in the case of Ramnarain Sons (P.) Ltd. (supra) and Hon'ble Allahabad High Court in the case of Sohan Lal Gupta (supra) that the intention of the assessee at the time of acquisition of the asset, whether the purchase is for the purposes of long-term investment or for the purposes of dealing in shares is the dominant factor for determining the nature of the asset. Applying this principle, in conjunction with the attendant facts and circumstances narrated above, we have no hesitation in holding that the income from sale of shares reflected in the investment portfolio account is liable to be assessed under the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
