https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=770011 https://www.taxtmi.com/caselaws?id=770011 Business profit vs. Capital gains - conversion of stock in trade into capital asset - benefit of indexation - HELD THAT:- There is no specific bar for conversion of stock in trade into investment and vice versa in view of the decision of the Hon'ble Supreme Court in the case of Sir Kikabhai Premchand [1953 (10) TMI 5 - SUPREME COURT] The act of the assessee in converting the stock in trade into capital asset is not against any law prevailing at the relevant time. This view is also getting strength from the Memorandum of Financial Bill, 2018 through which the provision relating to taxation at the time of conversion of stock in trade into capital assets brought into statute. As the assessee has acted in bonafide manner and in the interest of business for safeguard of future losses, it cannot be termed as colorable device developed to avoid tax liability. Since prior to the above amendment there was no provision in the Act to tax the conversion of stock-in-trade into capital assets thus the action of the assessee should not be doubted. It is settled law that every action cannot be doubted as being taken to avoid the tax liability. In view of these facts and circumstances of the case, we hold that the income arisen from the sale of both the properties is to be charged to tax as long term capital gains and assessee is eligible for benefit of indexation as per the provisions of the Act. Payment of Commission - We find that a sum was paid to the director of the assessee company and the payment was made after deduction of tax at source through banking channel. The necessary confirmation of the director was also submitted before the lower authorities which is available. Further the copies of the Ledger accounts of other two persons namely Shri Ram Singh and Shri Muni Singh to whom Commission of Rs. 5.00 lacs each paid after TDS were also filed. From the perusal of the same, it is evident that the payments were made to them through banking channel and TDS was also deducted and the copy of TDS certificates containing their PAN details were also filed by the assessee, therefore, the payments made to these persons as Commission cannot be disallowed. Accordingly, we direct to allow the same to the assessee. Disallowance of capital loss claimed on the transfer of shares - sham transaction of bogus short terms capital loss In the instant case on the basis of the enquiries conducted by the SEBI against the company - HELD THAT:- As the assessee company has purchased shares of Ashutosh Paper Mills Ltd. which is a company listed with stock exchange limited and these shares were purchased through a member broker via online system portal of stock exchange. It is a genuine transaction and no contrary evidence whatsoever was brought on record by the AO excepting referring to SEBI enquiry wherein nowhere assessee was alleged as one of the beneficiaries. Therefore, the short terms loss suffered by the assessee cannot be treated as bogus. Appeal of the assessee is allowed. Case-Laws Income Tax Wed, 30 Apr 2025 00:00:00 +0530