TaxTMI 
TaxTMI 
TaxTMI 
2014 (5) TMI 705
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....de of P & L A/c. at Rs.2,47,05,000/- which was taken to be the value of such shares since 31.3.2002, though valuation Report of the Auditor values the shares at (-) Rs.1.89 per share. These shares were not sold during the period 1.4.03 to 31.3.04. On 31.3.2004 it was shown as stock of 45,00,000 shares valued at Re.1. Assessee has relied on the valuation report of the Chartered Accountant as per accounts as at 31.3.03 for valuing the closing stock of 31.3.04 at Re.1 but the same amount of shares has been converted on 1.4.03 at Rs.2,47,05,000/-. Within the same financial year two different valuation has been adopted by the assessee for the same stock of shares which is not permissible. Without prejudice to the above discussion it is also noted that shares of another company namely, Yield Investment (P) Ltd. were also transferred from investment to stock along with shares of Offshore India Ltd. Part of the stock converted in Yield Investment (P) Ltd., were sold by the assessee during the year itself and the balance appears in the list of stock as held by the assessee as on 31/3/04. The method of the valuation of the shares of Yield Investment (P) Ltd. that has remained unsold on the....
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.... identical. The A.O. was not justified in accepting tax effect involving transfer of shares of Yield Investment (P) Ltd. from "Investments" to "stock in trade" and out-rightly reject the taxation effect of transfer of shares in the case of Off-Shore India Ltd. I therefore, direct the A.O. to delete the addition of Rs.2,47,05,000/-. Ground No.1 is therefore allowed." The revenue unsuccessfully challenged the order dated 2nd June, 2008 before the learned Tribunal which was dismissed by the judgment and order dated 21st June, 2013. The learned Tribunal, agreeing with the views of the CIT(A), dismissed the appeal and in doing so, held as follows: "Out of the shares of two companies which were converted on the same system, the department has accepted the system as correct in the case of Yield Investments Pvt. Ltd. and has disputed only in the case of Off-Shore India Ltd. As on 01.04.2003, the fair market value of Off-Shore India Ltd. was determined on the basis of break-up value of last available balance-sheet as on that date, which was also accepted by the Revenue as the market value as on 31.03.2003, there was no reason to dispute that the same was not the market value as on 01.04.2....
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.... transfer from investment to stock in trade could have been made only on 1st April or on the 1st October. In this case the assessee made the transfer on 1st April, 2003. He also drew our attention to Accounting Standards 13. He relied upon paragraph 32 thereof which reads as follows : "32. Investments classified as long-term investments should be carried in the financial statements at cost. However, provision for diminution shall be made to recognise a decline, other than temporary, in the value of the investments, such reduction being determined and made for each investment individually." He submitted that the assessee had followed the aforesaid paragraph in valuing the investment in respect of the shares of Off Shore India Limited. The last submission of Mr. Khaitan has been disputed by Mrs. Ghutghutia, learned Advocate appearing for the revenue. She submitted that the assessee was obliged, according to paragraph 32 of the Accounting Standards 13 relied upon by him, to make provision for the diminution of the value of the shares held by way of investment. According to Mr. Khaitan such diminution was made during the financial year 2001-02. The assessee continued to hold the sha....
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.... Non- Banking Financial Companies Prudential Norms relied upon by Mr. Khaitan cast an obligation upon the assessee to value its current investment at cost or break up value whichever is lower. The assessee did not value the shares of Off Shore India Limited on 1st April, 2003 as per the mandate appearing from the aforesaid guidelines. The assessee on the contrary valued the shares at more than Rs. 5/- per share whereas the shares on the date of conversion had a negative value of Rs. 1.89 paisa each on the basis of the balance sheet as on 31.03.03. Mr. Khaitan submitted that on 31st March, 2003 or 1st April, 2003 the balance sheet as at 31st March, 2003 of the Company Off Shore India Ltd. was not available. He in this regard, drew our attention to the Valuation Rules of the Wealth Tax Act, 1957. He relied upon Explanation to Rule 11 of the 3rd Schedule to the Wealth Tax Act, 1957. He, in particular drew our attention to paragraph 3 thereof which reads as follows : "The Board have decided that where the balance-sheet of a company drawn up as on the relevant valuation date is not published before the due date of filing wealth-tax return by the shareholders and hence not available to....