AI Drafter 
TaxTMI 
TaxTMI 
2018 (4) TMI 78
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....f the Income Tax Act 1961, (hereinafter referred to as the 'Act'), dated 01.03.2013. 2. The grounds of appeal raised by the Revenue read as under: 1. That on the facts and circumstances of the case, the Ld. CIT(A) has erred by ignoring that the assessee kept on changing as per its own liberty to convert stock-in-trade to investment and vice versa year to year as per its convenience specially, when the assessee failed to adhere to any reasonable basis and fails to apply any definite method of categorizing the income whereas the provisions on I.T. Act are differently applicable on business and on investment. 2. That on the facts and circumstances of the case, the Ld. CIT(A) has erred by ignoring that the motive of the ass....
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....ated as business income while completing the assessment for the A.Y. 2006-07 and 2008-09. It is further seen that Brought forward loss/depreciation was not adjusted with the assessed income resulting in excess carry forward of loss/depreciation." At the time of reassessment proceedings, the AO asked the assesseeto explain as to why the following income shall not be considered business income: a) STCG on Mutual Fund Rs. 71,60,368 b) STCG on Share Rs. 7,37,097 c) LTCG on Shares Rs. 37,57,174 d) LTCG on Mutual Fund Rs. 17,10,257 The assessee replied to the AO stating that assessee company is a NBFC Company and such shares and mutual funds were held by the assessee as investment only and hence th....
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....The investment as on 31.03.2007 and investment as on 31.03.2006 were Rs. 12,72,08,701/- and Rs. 12,52,92,647/- respectively. The difference of investments was Rs. 19,16,054/- (Rs.12,72,08,701-12,52,92,647). Therefore, AO made addition of Rs. 19,16,054/-. 4. Aggrieved by the order of the AO, the assessee filed an appeal before the CIT(A) who has allowed the appeal of the assessee. The CIT(A) noted that assessee`s case was fully covered in the assessee`s own case by the jurisdictional ITAT in ITA No.783/Kol/2009 for A.Y.2005-06, dated 01.07.2015.The CIT(A) noted that jurisdictional ITAT on the same issue having made a threadbare discussion on the matter, the income arising from investments was to be treated as income under the head 'Capita....
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....rsion of investment into stock-in-trade in AY 2004-05 and continuing the trading under that head and again converting the closing stock under that head into 'investment' in the AY 2005-06 under consideration amounts to a clear change of intention depending on the circumstances. The Hon'ble Tribunal noticed separate ledger accounts in respect of conversion of stock-in-trade into investment. By converting the stock-n-trade into investment, it does not alter the character, nature and intention of that particular transaction especially in the context of capital gain versus business income. By bringing in stock-in-trade under the head investment the assessee could reduce the tax incidence considerably. Subsequent conversion and treatment given i....
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....hat substantial dividend income earned reflecting the intention. Thus, according to assessee the net surplus was not a business income but on account of capital gain. To decide whether a transaction is in the nature of 'investment' or 'trading' the crucial test that laid down by various courts is that the 'intention' of the assessee at the time of purchase of shares. The AO on the other hand, was on the conduct of the business of the assessee which according to him carried out in a systematic and organized manner involving large volumes of transactions in shares. As seen from the principles laid down by various courts, the main test prescribed is the 'initial intention' of the assessee to decide whether an activity amounts to 'trading activ....