1993 (8) TMI 101 - AT - Income Tax

Appellate Tribunal upholds assessee's notional loss claim, directing Assessing Officer to accept decision.

ASSISTANT COMMISSIONER OF INCOME TAX. Versus ALPANA INVESTMENTS (P) LTD.

ASSISTANT COMMISSIONER OF INCOME TAX. Versus ALPANA INVESTMENTS (P) LTD. - TTJ 048, 525, Issues:1. Validity of assessment order under section 263 of the IT Act for the assessment year 1984-85 regarding computation of income chargeable under capital gains.2. Disallowance of claim for short-term capital loss by the Assessing Officer.3. Dispute over the genuineness of transactions related to the sale of rights to subscribe for convertible debentures.4. Application of legal principles regarding the treatment of notional loss in the context of capital gains.Analysis:1. The appeals before the Appellate Tribunal ITAT BOMBAY-B involved challenges to the assessment order under section 263 of the IT Act for the assessment year 1984-85. The CIT had set aside the original assessment order related to the computation of income chargeable under capital gains and directed a fresh assessment to be conducted by the Assessing Officer. The subsequent assessment resulted in the disallowance of the assessee's claim for short-term capital loss, leading to the Department filing an appeal against the CIT(A)'s order.2. The Assessing Officer disallowed the claim for short-term capital loss by the assessee, amounting to Rs. 47,40,400, on the grounds that the assessee had control over the majority of shares of the company and that the transactions involving the sale of rights were not genuine. The Assessing Officer viewed the entire amount realized on the sale of rights as a profit in the course of the assessee's business rather than a capital gain.3. The CIT(A) conducted a detailed examination of the transactions and found that the sale of rights had been made to multiple parties through brokers, with no connections to the assessee company. The CIT(A) verified the rates of shares quoted on the stock exchange and confirmed their genuineness. Based on these findings, the CIT(A) upheld the assessee's claim of suffering a notional loss of Rs. 47,40,000 and directed the Assessing Officer to allow the same.4. The Appellate Tribunal considered the legal issues surrounding the treatment of notional loss in the context of capital gains. The Department argued that there should be no computation of loss under the head of capital gains since the cost of the rights could not be ascertained. However, the Tribunal referred to previous judgments and held that the cost of the rights could be determined in the present case. Therefore, the Tribunal concurred with the decision to set off the notional loss against the capital gains, resulting in a net short-term capital loss of Rs. 23,64,770. The Department's appeal was dismissed, affirming the CIT(A)'s decision.5. The assessee's appeal against the order under section 263 was rendered infructuous following the dismissal of the Department's appeal. The Tribunal treated the assessee's appeal as dismissed for statistical purposes.This comprehensive analysis highlights the key issues, arguments, findings, and legal principles applied in the judgment delivered by the Appellate Tribunal ITAT BOMBAY-B.