TaxTMI 
TaxTMI 
2014 (1) TMI 697
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....7-08 2. The sum and substance of the grievance of the assessee is that the Ld. CIT(A) has erred in sustaining the disallowance of Rs. 1,83,75,418/- being valuation loss on conversion of shares into stock-in-trade. 3. The assessee is a share and stock broker. For the year under consideration, the assessee declared a loss of Rs. 1,36,190/-. The case was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee. During the course of the scrutiny assessment proceedings, the Assessing officer noticed that the assessee has credited income from operations of Rs. 5,06,87,371/- to the profit and loss account against which total expenditure debited is Rs. 5,63,87,889/-. The loss was arrived at Rs. 5....
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....hat of fabricating the accounts with an intention to evade taxes by setting off the valuation loss against bad debts recovered. 4. Taking a leaf out of the decision of the Hon'ble Supreme Court in the case of MacDowell & Co Ltd. 154 ITR 148, the AO concluded that the act of conversion of investment into stock in trade is nothing but a device to evade tax and went on to disallow the claim of valuation loss of Rs. 1,83,75,418/-. The AO went on to rely upon the decision in the case of Prudential Construction Ltd. Vs CIT (2000) 75 ITD 338 (Hyd) and held that the loss on account of valuation of closing stock of shares is deemed to be speculation loss in view of the explanation to Sec. 73 of the I.T. Act and completed the assessment. 5. The ass....
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.... under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however , unappreciative the Commissioners of Inland Revenue or his fellow tax payers may be of his ingenuity, he cannot be compelled to pay an increased tax." ....................................... "take with a view to the avoidance or mitigation of tax. It remains true in general that the taxpayer, where he is in a position to carry through a transaction in two alternative ways, one of which will result in liability to tax and the other of which will not, is at liberty to choose the latter and to do so effectively in the absence of any specific tax avoidance provision such as section 460 of the Income and C....
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.... and the High Courts even if the assessee has taken shelter of some tax planning which may have resulted into reduction of tax liability, it cannot be held that the assessee has evaded tax. The Ld. Counsel for the assessee further submitted that in the immediate preceding assessment year, the assessee has recovered bad debts to the tune of Rs. 8 crores. Therefore, the allegation of the Revenue authorities that the assessee has resorted to tax planning to reduce its tax liability does not hold any water because the assessee could have set off of the loss in the preceding year itself when the recovery of debt was more than 3 crores from the present year. The Ld. Counsel for the assessee prayed that the loss is genuine and as per the accountin....
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.... is income from interest at Rs. 1,27,870/-, miscellaneous income at Rs. 1,655/-, dividend Rs. 9,282/-. There was no business operation shown in the immediately preceding assessment year. During the year under consideration, as per Board's Resolution dt. 3.4.2006 i.e. 14 days after the date of purchase of shares, the Board resolved that Long Term investments in the shares of M/s. Sakuma Export be and hereby converted into stock-in-trade at current market rate. However, no reason has been given by the Board why within 14 days of purchase of Long Term investment has been decided to be converted into stock-in-trade. This may go against the commercial prudence. Further business operations for the year under consideration show that other than the....
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....nd of the accounting year i.e. on 20/21/3/2006. The assessee could not have done this exercise because it needed a Board Resolution which has to be filed with the ROC. 14. Considering the entire facts in the light of the conduct of the assessee, we have no hesitation to hold that the loss on the valuation of stock as on 31.3.2007 is nothing but an artificial loss which deserves to be ignored and as the AO has not given any cognizance to this loss, we confirm the findings of the lower authorities. The AO is directed to treat this loss as an artificial loss which is deserved to be ignored while computing the income for the year under consideration. 15. In the result, the appeal filed by the assessee is dismissed. ITA No. 7548/Mum/2010- Rev....