TaxTMI 
TaxTMI 
2021 (2) TMI 231
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....05 at Income Tax Office Kolkata returning a total income of Rs. 16,67,62,650/-. The break up of the total income as per the return of income was as follows: Business income Rs. 3,86,94,672 Long term Capital gain (LTCG) Rs. 12,80,67,978 Rs. 16,67,62,650 3. The SWFSL merged with another company by name M/s. Shaw Wallace Breweries Ltd., (SWBL) w.e.f. 1st April 2005 vide a scheme of merger duly approved by the Hon'ble High Court of Kolkata's order dated 26.10.2006 and the Hon'ble High Court of Bombay's order dated 01.12.2006. 4. In the course of assessment proceedings pursuant to the return of income filed on 31.10.2005, the assessee submitted before the AO that on account of the above merger, from and on 01.04.2005 SWFSLceases to have a separate legal entity and does not exist and no assessment can be framed in the name of a non-existent entity and doing so will render such order of assessment invalid. The AO however passed an order of Assessment dated 31.12.2007 under section 144 of the Income Tax Act, 1961 (hereinafter called 'the Act'). In the assessment so made, since evidence was not produced in respect of expenditure, the expenditure debited to P &....
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....& Company Ltd. 97 86132898 86132801 02 Shaw Wallace International Ltd., 4800 41940593 41935793 TOTAL : 4897 128073491 128068594 The assessee has treated the above transaction as Capital Gains arising out of Long term Investment. 9. The assessee also submitted that the shares in question were shares held by the assessee in its subsidiary which were incorporated in British Virgin Islands. The purpose of setting up of the subsidiary was to consolidate its investment and for the purpose of earning business profit through the subsidiaries business and not to trade in the shares of subsidiary. The assessee also pointed that shares were never treated as stock-in-trade and were disclosed as investment in the financial statements. The assessee also pointed out that the CBDT in its Circular No.4/2007 dated 15/06.2007 has clearly laid down tests for deciding as to when the sale of shares can be regarded as giving rise to business income and those tests laid down in the said circular, if applied to the facts of the assessee's case, the conclusion that can be drawn is that the gain in question has to be regarded as LTCG and not as giving rise ....
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....ares. During the relevant assessment year the appellant has shown an amount of Rs. 12,80,68,594/- as profit on sale of investment. There is no other income which can be attributed to the transaction in the form of purchase and sale of shares. The financial records of the appellant do not show that it is engaged in dealing in shares. Therefore, it cannot be said that the appellant has made this transaction for the purpose of its business. 5.5 As the shares dealt in by the appellant company are of its subsidiaries and have been kept for a very long period without showing any signs of business transaction, I hold that the AO is not justifled in treating the amount of Rs. 12,80,68,594/- as business income. Accordingly, I direct the AO to treat this amount as income from LTCG." 13. Aggrieved by the order of CIT(A) in treating income in question as giving rise to LTCG, the Revenue is in appeal before the Tribunal. In the C.O. the assessee has challenged the validity of the initiation of reassessment proceedings under section 148 of the Act on which issue the CIT(A) did not render any decision as he found that the Assessee has succeeded on merits on the point on which the AO m....
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....stor would not devote whole year in buying and selling only. (x) The characterization of securities in the books of account and balance sheet as stock-in-trade or investment: this is also a self explanatory point (xi) Whether the securities purchased or sold are listed or unlisted: this will help the assessing officer to a small extent but definitely more listed securities indicates the business activity. (xii) Whether investment is in sister/related concerns or independent companies: this can be a factor also. (xiii) Whether transaction is by promoters of the company: this will help in a way to judge whether promoters are investing in the company or not.. (xiv) total number of stock dealt in: it is again quantum (xv) whether money has been paid or received or whether these are only book entries: this is basically for assessing officer to judge the geniunity of transactions. 15. Another Circular being Circular No.4/2007 dated 15/6/2007 was also issued. In the Circulars so issued, the CBDT has emphasised that no single test is conclusive and it is the cumulative effect of all relevant factors which will be taken into considera....
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....ar of the CBDT dated 02.05.2016, the principles laid down in para 3(b) of Circular No.6/2016 has also been extended to unlisted shares and securities. Para 2 of the circular reads as follows: "2. Similarly, for determining the tax-treatment of income arising from transfer of unlisted shares for which no formal market exists for trading, a need has been felt to have a consistent view in assessments pertaining to such income. It has, accordingly, been decided that the income arising from transfer of unlisted shares would be considered under the head 'Capital Gain', irrespective of period of holding, with a view to avoid disputes/litigation and to maintain uniform approach." 18. It is not in dispute that the shares of M/s. Lee Edges were purchased by the assessee in the Financial Year 2003-04 and those of M/s. Shaw Wallace Breveries Ltd., were purchased in the Financial Year 2001-02 were unlisted shares. These shares were sold in Financial Year 2004-05. These shares were held for more than 12 months in both the cases. The admitted position with regard to treatment in the books of accounts is that the shares have been treated as investment and not as stock-in-trade. In the ....