2018 (2) TMI 882

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....ied? 2) Whether the ITAT was justified in holding that under the mercantile system of accounting, interest income accrued on basis of the assessee's contention that recovery as well as interest (on such deposits) is doubtful? 2. On the first question, this Court notices that the AO brought to tax substantial amount for the concerned Assessment Year rejecting the assessee's claim of capital gains. The assessee was engaged in the business of investment and securities and had at the relevant time maintained a distinct portfolio in respect of stock in trade and investment. For the particular year, the assessee acquired shares in certain companies that underwent amalgamation. Those companies, which had investment portfolio containing shares ....

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....mpanies which were engaged in the trading of shares. The appellant is pleading that the observation of the ld. AO is misconceived as it is a matter of record that the companies which have been amalgamated the appellant company were also holding these shares as investment. It is further emphasized by the ld. AR that the AO has misinterpreted the general terminology of the notes of the accounts/audit wherein even the sale of investments are termed as trading in shares. After considering the rival submissions and various case laws quoted by the AO as well as relied upon by the ld. AR, I am of the considered view that in the facts and circumstances of the instant case the view taken by the AO does not appear correct, it is seen from the records....

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....al Holdings transferred on amalgamation 4,889,109.883 54,007,145.72 Total stock of shares after amalgamation 12,945,169.593 171,609,299.49 Purchase of Shares 85,926.000 2,393,674.01 Stock of Shares 13,031,095.593 174,002,973.50 Less:     Shares held as stock converted into investment (of Pavitra Commercials Ltd.) transferred to Capital Reserve (Refer Annexure-2) 2,078,066.000 32,767,348.61 Transferred to Capital Reserve on Amalgamation 287,500.000 662,500.00 Sale of Shares (on cost) (Refer Annexure-3) 2,244,050.254 41,425,034.89 Closing stock of Shares held as Stock (Refer Annexure-4) 8,421,487.000 99,149,290.00   14. There is absolutely no allegation by Ld. AO regarding these facts as observed by....