The Tax Publishers2020 TaxPub(DT) 5493 (Mum-Trib)

INCOME TAX ACT, 1961

Section 37(1)

Inactivity or lull in the business of the assessee for some years could not conclusively dislodge claim of assessee that it was carrying on business of trading in shares. Further, valuation of stock-in-trade was in conformity with method of valuation of stock-in-trade that was consistently followed by assessee. Therefore, trading loss on account of fall in value of scrips was an allowable trading loss.

Business loss - Trading loss on account of fall in value of scrips - Disallowance on account of lull in business activity for some years -

Assessee claimed trading loss of Rs. 17 lakhs in share business stated to be carried out in proprietorship concern. There was no trading in shares but the loss was arising on account of valuation of closing stock at year-end. However, AO noticed that there was no organized or frequent trading activity which was evident that in last 5 years, there were only two transactions of purchase and sale in the concern. During the year, the assessee did not carry out even a single trade in proprietorship concern. Though the assessee carried out sale of shares in individual capacity, but the shares held in trading concern were left untouched. Therefore, AO concluded that assessee had no intention of dealing in shares held in proprietorship concern and hence, trading loss would not be allowable. Held: Inactivity or lull in the business of the assessee for some years could not conclusively dislodge claim of assessee that it was carrying on business of trading in shares. Further, valuation of stock-in-trade was in conformity with method of valuation of stock-in-trade that was consistently followed by assessee. Therefore, trading loss on account of fall in value of scrips was an allowable trading loss.

Relied:Kesavdas Ranchhod Das v. CIT (1972) 83 ITR 1 (Bom) : 1972 TaxPub(DT) 89 (Bom-HC), CIT v. Sutlej Cotton Mills Supply Agency Ltd. (1975) 100 ITR 706 (SC) : 1975 TaxPub(DT) 340 (SC) and Chainrup Sampatram v. CIT (1953) 24 ITR 481 (SC) : 1953 TaxPub(DT) 120 (SC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 1998-99, 1999-2000, 2001-02, 2002-03, 2003-04, 2004-05, 2007-08, 2008-09, 2010-11, 2011-12, 2012-13, 2013-14 & 1999-2000


INCOME TAX ACT, 1961

Section 23(1)

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