Revenue's Appeal on Share Sale Loss Treatment Partly Allowed; Recalculation Ordered per Supreme Court

INCOME TAX OFFICER. Versus KANTI SWARUP AGGARWAL.

INCOME TAX OFFICER. Versus KANTI SWARUP AGGARWAL. - TTJ 011, 338, Issues:
1. Competency of appeals filed by the Revenue.
2. Treatment of loss on the sale of shares as business loss.

Competency of appeals filed by the Revenue:
The appeals filed by the Revenue arose from the order of the AAC, with one appeal filed by the ITO, C-Ward Faridabad, and the other by the ITO, A-Ward Faridabad. An application for condonation of delay was also filed with the second appeal. The issue at hand was which appeal was competent. The Commr. has the authority to direct the ITO to appeal to the Tribunal against an order passed by the AAC under certain sections. The CIT directed the ITO, C-Ward, Faridabad to file the appeal, which was considered competent as the necessary certificate was appended to the memorandum of appeal. The second appeal was deemed infructuous, and the reason for the delay in filing it was not considered.

Treatment of loss on the sale of shares as business loss:
The assessee derived income from various sources, including dealing in shares. The assessee claimed a loss on the sale of shares, contending that the investment had been converted into stock-in-trade. The ITO, however, treated the loss as a capital loss. On appeal, the AAC accepted the submission that the shares were converted into stock-in-trade and directed the ITO to allow the loss as a business loss. The Departmental Representative argued that the assessee had not provided sufficient evidence to establish the intention to treat the investments as stock-in-trade. The method of calculating the loss was also disputed. The Tribunal noted that an assessee can convert shares into stock-in-trade as per a Supreme Court judgment. However, the method of calculating the loss was found to be incorrect, and the ITO was directed to rework the loss in accordance with the Supreme Court judgment. One appeal was partly allowed, and the other was dismissed as infructuous for statistical purposes.