SC dismisses I-T dept`s plea against Escorts Asset Management
New Delhi: The Supreme Court has dismissed the Income Tax department`s plea that Escorts Asset Management Ltd had furnished inaccurate particulars of its income for 2002-03 and thus evaded tax.
A bench headed by justice SH Kapadia rejected the
department`s contention that the loss of more than Rs 42 lakh
claimed by EAML was a speculative loss and not a normal
capital loss that arose from sale of shares of other companies
as claimed by the assessee to avail tax benefits.
The apex court upheld both the Income Tax Appellate
Tribunal`s and the Delhi High Court order saying that the
assessee was not carrying the business of sale of shares of
other companies but was having the shares as investments, thus
the loss suffered on the sale of investments was therefore be
treated as long-term capital loss.
Attorney General GE Vahanvati said that Section 73 of
the Income Tax Act 1962 specified only "shares of the company"
and does not make any distinction between trading of shares
held as investment and trading of shares held stock-in-trade.
According to the petition, EAML, which manages assets of
Escorts Mutual Fund, had shown both income received from
dividends out of investments in other companies and the sale
of shares of other companies in its books of accounts.
Vahanvati said as the asset management company had shown
the shares under the head `investment` in the balance sheet,
the loss on sale of shares was required to be treated as
speculation loss since there was no distinction between shares
held as investment or stock-in-trade under the Act.
After the assessee filed its returns declaring a total
loss of Rs 18.40 lakh for assessment year 2002-03, the
assessing officer had given a showcause notice to the company
noting that the latter had claimed long-term capital loss on
investment amounting to Rs 42.41 lakh.
The tax authorities rejected Escorts` contention that the
loss under the head `Business` was on account of securities
held by it as investments and treated its capital loss as
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