Recording of transaction in the books is important in determining the taxation: ITAT
- During the year under consideration, the assessee has shown long term capital gain of Rs.1730,58,51,513/- on sale of shares in JMMSSPL to MSSPL.
- The Assessing Officer proceeded to treat this gain as the business income of the assessee for the reason that the assessee was in the business of shares and securities as a broker and was also involved in share trading business.
- The Ld.CIT(A) upheld the order of assessment by holding that the termination of the joint venture was to avoid commercial inconvenience accruing in the future as a joint venture and that termination was a result of split of business arrangement between the assessee and its partners.
- According to the appellant since these shares were held as capital asset for more than 8 years therefore, the gain on sale has to be treated as LTCG.
ITAT Mumbai held as below:
- The Assessee did not participate in the day to day operations of the Company, however it had a right as a shareholder to nominate 4 members to the board of the Company while Morgan Stanley could nominate.
- The shares were reflected as investments and not stock in trade in the books of accounts of the assessee.
- It is observed by the Hon’ble Supreme Court in the case of Azadi Bachao Andolan that an act which is otherwise valid in law cannot be treated as to evade tax merely on the basis of some suspicious underlying motive supposedly resulting in some economic detriment or prejudice to the Revenue.
- In the result, the appeal of the assessee is allowed and the appeal of the revenue is dismissed.