Punjab National Bank Vs PCIT (Delhi High Court)
In a recent ruling Delhi HC remanded the proceedings to the AO to consider the Assessee’s alternate claim for loss arising out of the HTM securities, as loss under the head ‘income from business and profession.
It is the case of the assessee that HTM (Held-to-maturities) securities are purchased and held till the same are redeemed by the issuing entity. Assessee declared the gains of Rs. 27,27,44102/- from redemption of such securities as profits chargeable under the head ‘capital gains’. Also assessee claimed loss of Rs. 10,06,04,870/- being the business loss on conversion of capital asset into stock in trade under the same head i.e. capital gain. The loss of Rs. 10,06,04,870/- is claimed in the computation of income but is not booked in the books of accounts. The AO further stated that once the Held to Maturity category security is converted into Available for Sale, it will suffer two incidences of tax on the date of sale. The first incidence of tax would be the result of application of Section 45(2) which provides for once capital asset is converted into stock-in-trade, capital gain would be taxable and sale consideration would be the market value on the date of conversion. Another instance of tax under section 28 as normal business income where the cost of acquisition will be the cost of security and the sale consideration will be sale price, the difference between sale price and cost price equal business income. AO observed that the assessee has failed to substantiate the claim and has not furnished the details of cost of acquisition and the selling price either in the return or during the assessment proceedings.
