PRINCIPAL COMMISSIONER OF INCOME TAX-7 vs PAVITRA COMMERCIAL LTD.

PARTICULARS,"NO. OF

SHARES","AMOUNT (In

Rs.)

Opening Stock (Refer Annexure-I),"8,056,059.710","117,602,153.77

Add :,,

Shares of Vindhyachal Holdings transferred on amalgamation,"4,889,109.883","54,007,145.72

Total stock of shares after amalgamation,"12,945,169.593","171,609,299.49

Purchase of Shares,"85,926.000","2,393,674.01

Stock of Shares,"13,031,095.593","174,002,973.50

Less:,,

Shares held as stock converted into investment (of Pavitra Commercials Ltd.) transferred to

Capital Reserve (Refer Annexure-2)","2,078,066.000","32,767,348.61

Transferred to Capital Reserve on Amalgamation,"287,500.000","662,500.00

Sale of Shares (on cost) (Refer Annexure-3),"2,244,050.254","41,425,034.89

Closing stock of Shares held as Stock (Refer Annexure-4),"8,421,487.000","99,149,290.00

The decision of Revenue as to whether the claim of the assessee with respect to the income reported by it and whether it,,

constitutes business income, is dependent on the entirety of the circumstances. The decisions of the Court have emphasized five",,

broad tests whether the income bears the character of business income or capital gain - firstly, whether the company or concern is",,

authorized in its Memorandum of constituting documents to deal with shares; (2) whether the entity had shown the shares under the,,

head ""Investment""; (3) whether the assessee/entity utilized its own funds and had not borrowed funds for the purpose of acquiring",,

shares; (4) whether the nature of infrastructure - whether it is small, represents investment activity rather than the trading activity that",,

would require larger infrastcuture; and lastly, whether the behaviour of the assessee is such as to disclose income/earning has",,

objective i.e. ""obtaining dividend"" rather than trading.",,

This Court notes that all the tests and the relevant rulings were noticed by both the authorities below, who had applied their mind",,

and held that the AO''s approach in singular fixing scrutiny to the shifting and regulations of some shares to treat as business income,",,

was erroneous. In the opinion of the Court, these findings are not only factual but sound, as they are based upon appreciation of facts",,

at two levels and application of the settled law. No error of law is apparent; no question of law arises.,,

As far as the question with respect to reporting of mercantile interest of doubtful debts is concerned, the question is covered by the",,

decision of this Court in Commissioner of Income Tax Vs. Vasisth Chay Vyapar Ltd. (ITA 552/2005 and connected cases decided,,

on 29.11.2010). The Court had applied ""real income"" principle to uphold the assessee''s contention. Those observations are squarely",,

applicable in the present case.,,

The appeals are dismissed. All the pending applications also stand disposed off.,,