COMMISSIONER OF INCOME TAX Vs. SMC CREDIT LIMITED

JUDGEMENT

(1.) In this appeal filed by the revenue against the order dated 17.10.2008 passed by the Income-tax Appellate Tribunal in ITA No. 1133/Del/06 pertaining to the assessment year 1998-99, the issue relates to the loss of Rs 18,06,620/- claimed by the respondent / assessee as a trading loss on account of transactions in shares. The Assessing Officer as well as the Commissioner of Income-tax (Appeals) held that the shares in respect of which the loss is claimed were in the nature of investment and, therefore, the loss incurred in respect thereof would be capital loss and not a business / trading loss.

(2.) The Income-tax Appellate Tribunal, however, found as a fact that the shares in question were held as stock-in-trade. The learned Counsel for the revenue drew our attention to an order dated 12.10.2004, whereby the Appellate Tribunal, in respect of this very assessment year, had, in the first round, set aside the order dated 09.04.2001 passed by the Commissioner of Income-tax (Appeals), who had deleted the loss of Rs 18,06,620/- incurred on the sale of the said shares and directed that the same be treated as a business loss instead of a capital loss as treated by the then Assessing Officer. The Tribunal, in the first round, by virtue of its order dated 12.10.2004, set aside the decision of the Commissioner of Income-tax (Appeals) and remanded the matter to the Assessing Officer with a direction to pass a reasoned order with specific reference to the material on record and to come to a conclusion afresh after giving a reasonable opportunity of being heard to the assessee.

(3.) It is thereafter that the Assessing Officer re-examined the matter and came to the conclusion that the shares were held as investment and the same were shown to be investments in Schedule-4 of the balance sheet. Similarly, it was also pointed out in the assessment order that the shares, which were held as stock-in-trade for the purposes of earning business income, had been separately reflected by the assessee in Schedule-5 of the balance sheet. Thus, going by the presentation of the accounts and the balance sheet given by the assessee itself, the Assessing Officer held that the shares in question were held by the assessee not as stock-in-trade, but as an investment and consequently, the loss incurred in respect thereof would be a capital loss and not a business or trading loss. The same view was taken by the Commissioner of Income-tax (Appeals) in his order dated 14.02.2006.