Loss on account of forfeiture of share application money can be treated as business loss
Lustre Merchants Pvt Ltd Vs DCIT
Loss on account of forfeiture of share application money can be treated as business loss
– Assessee’s appeal allowed: DELHI ITAT
Whether loss on account of forfeiture of share application money is to be treated as business loss – YES : ITAT
no merit found in the action of the Revenue authorities especially in view of the direction of the Tribunal in the original proceedings while setting aside the issue to the file of the AO. There is no finding by the Assessing Officer to the direction by the Tribunal that the lower authorities have not adverted to the crucial fact assessee’s investment in Surya Roshni Ltd., a group company by way of subscription to the convertible debentures being held as stock-in-trade not only in this year, but, in earlier year also. Once the shares are held as stock-in-trade as argued before the Tribunal on the earlier occasion for which the Tribunal had restored the issue to the file of the Assessing Officer for verification of this crucial fact and since there is no material to controvert the above submission of the assessee before the Tribunal that such shares were held as stock-in-trade, therefore, the lower authorities in the set aside proceedings have not followed the direction of the Tribunal. The CBDT, vide Circular No.6/2016 dated 29th February, 2016 had categorically held that ‘where the assessee itself, irrespective of the period of holding the listed shares and securities, opts to treat them as stock-in-trade, the income arising from transfer of such shares/securities would be treated as its business income.The Circular being clarificatory in nature is retrospective and cannot be held as prospective. The coordinate Bench of the Tribunal in the case of Cosmos Industries Ltd. while deciding somewhat identical issue has held that the loss incurred on sale of shares of a subsidiary company is a business loss. Respectfully following the decision it was hold that the loss amounting to Rs.41,60,000/- is a business loss.
ITA No.6396/Del/2015
