TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 1977
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....at the assessee had shown long term and short term capital gains on sale of shares, which were earlier, held as stock-in-trade. The AO noted that the assessee had converted the stock-in-trade into investments with the sole object of claiming deduction u/s 10(38) and lower rate of taxation u/s 111 A. The AO also noted that the assessee had been carrying on activity of dealing in shares in an organized fashion and had incurred an expenditure of Rs. 54,00,000/-. In the past, the assessee had been showing business income from trading. Therefore, relying upon various decisions, the AO held that the act of converting stock-in-trade into investment was with the sole purpose of avoiding payment of taxes. Therefore, the AO held that the income arisi....
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.... 6.2 On the second issue as to whether the conversion is motivated by tax avoidance, shorn off extracting the entire discussion, reading of paras 14.3 to 14.7 of the order of the Ld.CIT(A) clearly establishes that the Ld.CIT(A) has well appreciated the facts and thereby arrived at a correct conclusion that it is not the case that the assessee has entered into any sham transactions for avoiding fax and the conversion of stock into investment is transparent from the audited accounts of the assessee with clarificatory note appended in the Notes to Accounts for the FY 2002-03. As regards the argument /he Ld.DR that such conversion is to be treated as a sham transaction based on the decision of the jurisdictional High Court in the case of Twi....
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....fit arising out of sale on shares as capital gains. 6. In the result, appeal of the Revenue is dismissed. 7. The issue involved in the appeal filed by assessee is whether the Ld. CIT(A) was justified in law, in directing the Ld. AO to make addition of Rs. 9,11.883/- being the difference between the book value of shares held as stock-in-trade as on 31.03.2002 and the cost thereof at which the same were converted into investments on 1.4.2002, treating the same as business income u/s.41(l) of the Income-tax Act, 1961 upon their sale in F.Y. 2005-06. 8. Rival contentions have been heard and record perused. In the instant case, the assessee converted his stock-in-trade into investment on 01/04/2002 at cost. Prior to the said date, the stoc....
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....stments Pvt. Ltd. In other words, the loss allowed in the earlier years, which would have been taxable as business profits, it the appellant had not converted stock-in-trade into investments, has not been offered for taxation even though the same has now been recovered. In this regard, the provisions of section 41 (I)(a) are relevant, and read as under: "41.49(5o)(1) Where an allowance or Reduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the firstmentioned person) and subsequently during any previous year,- (a) the first-mentioned person has obtained, whether in cash or in any other manner whatsoever, any amount in respect of....