TaxTMI 
TaxTMI 
2008 (12) TMI 435
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....us decisions cited at Bar. 4. It was noticed by the Assessing Officer that assessee had debited to P&L A/c of the year under consideration the sum of Rs. 1,61,28,946 being the loss on sale of investment. After considering the facts and circumstances of the case, the Assessing Officer treated the said loss to be of capital in nature as against business loss, claimed by the assessee. The Assessing Officer, therefore, disallowed the set-off of the aforesaid loss against other income of the year under consideration. The Assessing Officer also mentioned that the loss on investment would be long-term capital loss, it will be carried forward to be set-off against long-term capital gain only. 5. Being aggrieved, the assessee preferred an appeal before the CIT(A). 6. After considering the facts of the case as well the submission of the assessee and the Assessing Officer's order, the CIT(A) had taken a view that the Assessing Officer was justified in treating the loss from shares in question as a capital loss. 7. However, without prejudice to the above i.e. without prejudice to his finding that the loss on sale of shares is to be treated as a capital loss, the CIT(A) further held that ev....
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....n Schedule 3 as investment and inventory of shares in Schedule 4 as inventories separately. Thus, the appellant was holding some shares as stock-in-trade and other shares as investment. It may be pertinent to point out here that these shares were reflected as investment in balance sheet and not as inventory. It was further noticed from the perusal of balance sheet as on 31-3-2002 that the appellant had made a provision for diminution in market value of investment of Rs. 1,61,26,775 under the head investment in Schedule 4 of the balance sheet, but in the computation of income, such loss was not claimed. Rather the provision was debited below the line, i.e., after computing then net profit/loss as per P&L A/c. Had the appellant was holding these shares as stock-in-trade, the diminution in the value of shares would have been claimed as a business loss, because the stock-in-trade is valued at cost or market price whichever is lower and in a case if market price on the last date of previous year was lower than the cost price, the diminution in value is an allowable business loss. It may also be pertinent to note that in the P&L A/c for the year ended on 31-3-2004, i.e., for assessment y....
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....s of M/s. Rathi Alloys & Steel Ltd. is concerned, the CIT(A) has rightly appreciated the facts of the case and came to the conclusion that the assessee hold these shares as an investment and not as stock-in-trade or as a trading asset. The decision of the SMC Bench of Tribunal in the assessee's case for the assessment year 1990-91 does not advance the assessee's case any further inasmuch the issue involved therein was about the determination of loss and not with regard to the issue whether shares of M/s. Rathi Alloys & Steel Ltd. held by the assessee on investment account or on trading account. However, in the light of the facts of the case, the said decision is not applicable to the issue in hand. Therefore, the CIT(A)'s order holding the loss on sale of shares of M/s. Rathi Alloys & Steel Ltd. to be a capital loss is upheld. 11. Even otherwise, if the loss incurred on the purchase and sale of shares in question is to be treated as business loss, the Explanation to section 73 would be attracted to the said loss, and, consequently, the said business loss would be treated to be a speculative loss within the meaning of section 73 of the Act as so held by the CIT(A) in his order. The....
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....represent "positive income". In other words, "loss" is negative profit. Both positive and negative profits must enter into computation, wherever it becomes material, in the taxable income of the assessee. In this case loss of sale of share investment was clearly more than other items of income. Thus, the appellant does not fall in category (1) mentioned above. 5.3 The category (2) is in respect of nature of business as to whether the principal business of the company was granting loans and advances, or not. In this regard, it may be noted that the nature of principal business of the assessee can be judged from the application of its funds. In this case, the appellant himself has admitted that its one of the principal business was granting loans and advances. Thus, it was not the case of the appellant that principal business of the company was granting loans and advances but it was "one of the principal business". From the position of the application of funds, it would be clear that the principal business of the appellant was investments and not granting loans and advances. The position of application of funds under various heads in earlier years is as under:- Period Fix....