RUSSEL CREDIT LIMITED,KOLKATA V. PCIT, KOL, KOLKATA

ITA 407/KOL/2023

AI Insights

The case involves Russel Credit Limited, which appealed against the order of the Principal Commissioner of Income Tax, Kolkata-1, passed under section 263 of the Income Tax Act, 1961. The dispute centered on the treatment of gains from the transfer of unquoted preference shares of ICICI Bank Ltd, which were initially treated as long-term capital gains (LTCG) by the Assessing Officer but later contested by the Principal Commissioner. The Tribunal examined whether the issues were adequately addressed by the Assessing Officer and whether the gains should be treated as business income or capital gains. The Tribunal concluded that the Assessing Officer had properly considered the CBDT instructions and the specifics of the case, leading to the decision to set aside the Principal Commissioner's order.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 470982 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-08-2024
• Assessment Year: 2018-2019
• Appeal Filed On: 26-04-2023
• Other Referred Cases: Pramod Kumar Tekriwal (ITAT/92/2021, ITA No. GA/2/2021)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT KUNDU
• Assessee Lawyers: J. P. KHAITAN; COUNSEL
• Keywords: Set aside; Business income; Capital asset; Revised return; Question of law; Corroborative evidences; Fair market value; Capital Gains; Sham transactions; Wrong claim; Revision of order; Date of conversion; Bogus
• Section: 143(3); 142(1); 263

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH KOLKATA BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI SANJAY AWASTHI, ACCOUNTANT MEMBER ITA No. 407/KOL/2023 Assessment Year: 2018-19 Russel Credit Limited, 37, Virginia House, J.L. Nehru Road, Kolkata - 700071 (PAN: AABCR3494H) Vs PCIT, Kolkata-1, Aayakar Bhawan, 7th Floor, P-7, Chowringhee Square, Kolkata - 700069 (Appellant) (Respondent) Present for: Appellant by : J.P. Khaitan, Sr. Counsel Bikash Chanda, CA Respondent by : Abhijit Kundu, CIT DR Date of Hearing : 21.08.2024 Date of Pronouncement : 23.10.2024 O R D E R PER SANJAY AWASTHI, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of the Ld. Principal Commissioner of Income Tax, Kolkata-1 (hereinafter referred to as “the Ld. Pr. CIT”) passed u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2018-2019, dated 27.02.2023, which has been passed against the assessment order u/s 143(3) read with sections 143(3A) & 143(3B) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) passed by the Assessing Officer, National e- Assessment Centre, Delhi, dated 08.03.2021. 1. In this case, it is necessary to recapitulate the facts in brief. The Appellant filed his return of income on 29.09.2018 declaring a total income of Rs. 36,79,98,920/-. Subsequently, a revised return was filed on 2 ITA No. 407/Kol/2023 Russel Credit Ltd. : AY: 2018-19 29.03.2019 at an income of Rs. 36,18,36,450/-. Thereafter, assessment was completed u/s 143(3) of the Act on 08.03.2021 at an income of Rs. 39,76,74,478/-. Following this assessment order, a notice u/s 263 of the Act was issued on 30.11.2022 and thereafter an order under this section was passed on 27.02.2023, setting aside the order u/s 143(3) of the Act dated 08.03.2021 on the following grounds: (a) Treatment of gain from transfer of 34 unquoted preference shares of ICICI Bank Ltd as long-term capital gain (hereafter ‘LTCG’) of Rs. 12,97,56,648/- instead of business profit of Rs. 18,48,26,280/-, ostensibly on the ground that in the audited accounts these investments were classified as “stock-in-trade”. (b) Set off of the LTCG against the brought forward long-term capital loss of AY 2012-13, which could only be Rs. 12,10,75,318/-, being the figure of loss surviving after assessment u/s 143(3) of the Act for the AY 2012-13, and not Rs. 12,97,56,648/-, as claimed by the appellant. (c) Allowing of Rs. 96,65,106/- towards loss on disposal of property, plant and equipment, even when, allegedly, this was not allowable, being capital in nature. 1.1 Aggrieved with this action of Ld. Pr. CIT, the appellant has filed the present appeal, challenging the impugned order through the following grounds of appeal: “Ground No. 1: Profit on sale of investment in 34 nos Unlisted Preference Shares of ICICI Bank Ltd considered as business income instead of Long-Term Capital Gain Rs. 12,97,56,648/-: (a) For that the Learned Principal Commissioner of Income Tax, erred in law in holding that the assessment order under section 143(3) of Income Tax Act, 1961 (the Act) is erroneous and prejudicial to the interest of the revenue in respect of profit on sale of Unlisted Preference Shares of ICICI Bank Ltd. (b) For that the learned Principal Commissioner of Income Tax was not justified in considering the assessment order under section 143(3) of the Act is erroneous, since 3 ITA No. 407/Kol/2023 Russel Credit Ltd. : AY: 2018-19 the Appellant Company has relied upon the CBDT instruction no. F.NO.225/12/2016/ITA.II dated 2nd May 2016 in its submission and the Assessing Officer (AO) had followed the said CBDT instruction while allowing the profit on sale of Unlisted Preference Shares of ICICI Bank Ltd to be treated as Long- Term Capital Gain instead of business income. Hence, the Assessment Order cannot be considered as erroneous, in view of the clear-cut instruction by CBDT that income arising from transfer of unlisted shares would be considered under the head 'Capital Gain' and not business income irrespective of period of holding (c) For that the learned Principal Commissioner of Income Tax was not justified in setting aside the order of the Assessing officer passed u/s 143(3) of the Act considering the profit on sale of Unlisted Preference Shares of ICICI Bank Ltd as business income, without appreciating the fact that the assessing officer had duly enquired and verified the documents and records of the Appellant Company relating to its sale of unlisted preference shares before passing the assessment order u/s 143(3) of the Act. (d) For that the order passed by the learned Principal Commissioner of Income Tax u/s 263 of the Act is against the settled principle of law that an order of Assessing officer should be both erroneous and prejudicial to the interest of the revenue, and such tests being not satisfied in the instant case, the order u/s 263 is in excess of jurisdiction and liable to be quashed. (e) Without prejudice, the learned PCIT erred in holding that the AO had not gone through the CBDT instruction no. F. NO 225/12/2016/ITA.II dated 2nd May 2016 for examining the situation in which the instruction is not applicable, even though the same was duly submitted by the Appellant Company during the course of original assessment proceedings u/s 143(3) of the Act. Relief Prayed: The proceedings u/s 263 of the Act in respect of sale of Unlisted Preference Shares should be quashed. Without prejudice the treatment adopted by the Appellant Company and confirmed by the AO during the scrutiny assessment proceedings should be accepted. Ground No. 2: Reduction in Set off of brought forward Long-Term Capital Loss with Long Term Capital Gain of Rs.86,81,330/-: (a) That on the facts and in the circumstances of the case, the Ld. PCIT erred in making the set off of Long-Term Capital Gain of Rs. 12,10,75,318/- with assessed brought forward Long- Term Capital Loss of Rs. 12,10,75,318/- of AY 2012-13 instead of returned brought forward Long-Term Capital Loss of Rs. 12,97,56,648/- Relief Prayed: Set off of brought forward Long-Term Capital Loss with Long Term Capital Gain of Rs. 12,97,56,648/-should be allowed. Ground No. 3: Loss on disposal of Property, Plant & Equipment already added back in the computation of income of Rs. 95,65,105/-: (a) For that the learned Principal Commissioner of Income Tax was not justified in directing AO to verify whether the loss on disposal of property, plant & equipment of Rs. 95,65,105/-has been added back by the Appellant Company, without appreciating the fact that the Appellant Company has submitted all the documents 4 ITA No. 407/Kol/2023 Russel Credit Ltd. : AY: 2018-19 and records substantiating the fact that the said loss has been added back in the computation of income Relief Prayed: The direction given by learned PCIT should be quashed. Ground No. 4: To crave leave to add, modify or abrogate any grounds as may be considered appropriate during the course of hearing.” 2. The appellant has filed a paper book running into 185 pages, written submissions on each issue and copies of some cases purportedly on the ground that once an issue has been considered by the Ld. AO then the same cannot be revisited by the authority seized with performing an action u/s 263 of the Act. The Ld. DR has also filed written submissions in support of the impugned order. 2.1. Before us, the Ld. AR has vehemently argued for quashing of the impugned order. Also, heavy reliance has been placed on CBDT’s Instruction No. 225/12/2016/ITA.II dated 02.05.2016 and an earlier Circular No. 4/2007 dated 15.06.2007 which, as we shall see, have a critical bearing on this subject. 2.2. The crux of the Ld. AR’s contention on the claim of LTCG is that the issue of taxability of gain arising out of sale of preference shares in M/s ICICI Bank Ltd was dealt with by the Ld. AO in as much as there was a specific query u/s 142(1) of the Act (dated 25.01.2021, as placed before us on pages 145 onwards of paper book) as under: “2. As per the computation under the head Business and Profession, you have reduced the amount of Rs 18.48,26,280/- from Profit on sale of long term investment to be considered separate income under the head capital gain. This amount was shown as LTCG in the Capital Gain schedule, wherein you have claimed amount of Rs 337797480/- as Full Value of consideration received from sale of asset. The capital gain of Rs 12,97,56,648/- arose which was set off against the Long term capital loss of AY 2012-13 In respect of the above transaction, kindly submit the following: i. The FMV of this asset has not been stated in the ITR. You are required to submit the FMV of the asset as per the provision of the Act along with supporting evidence. 5 ITA No. 407/Kol/2023 Russel Credit Ltd. : AY: 2018-19 ii. Further from Balance sheet it is seen that the value of non-current investment has not reduced. You are required to justify the same with supporting documents in respect of the same and kindly reconcile the same with Balance Sheet iii. In this regard kindly justify your claim of LTCG along with documents of sale, purchase and relevant portions of Bank statement highlighting this transaction of sale and purchase of the said asset.” In response to this query by the Ld. AO, the Ld. AR relied on the detailed response submitted before the Ld. AO (as available in the paper book filed before us at pages 132-144 and again at pages 149-167). Through this response the appellant laid out the conspectus of facts surrounding this issue and also placed reliance on CBDT Instruction dated 02.05.2016 (supra) to canvass the point that this Instruction directs the Assessing Officer to treat gain arising from transfer of unlisted shares under the head “Capital Gain”. From the paper book, the Ld. AR read out the detailed explanation submitted before the Ld. AO in support of his claim. Incidentally, the extract of the minutes of the Board Meeting, dated 05.02.2021, were also pointed out on pages 171-173 of the paper book, to demonstrate that the treatment of the said gain as “Capital Gain” was placed before the Board for approval, along with the period of holding and other details of the investments in question. 2.3. The Ld. AR also emphasised the facts pertinent to the issue of setting off of LTCG against brought forward losses. Regarding this issue it has been pointed out that vide notice u/s 142(1) dated 28.12.2020 the Ld. AO had enquired into this matter and had been apparently satisfied about the veracity of claim tendered by the assessee. To summarise the facts in this regard, it is seen that the initial loss (long term capital loss) claimed in AY 2012-13, which was Rs. 23,35,75,318/-, was reduced to Rs. 12,10,75,318/- through an assessment order. Admittedly, this assessment order has been appealed against with the matter still pending for adjudication before the Ld. First Appellate Authority. As informed by the Ld. AR and pointed out in the paper book, this fact was duly mentioned in the audited accounts (Notes) and placed at page 24 of the paper book. It has been averred that this action of the Ld. AO was taken adverse note of 6 ITA No. 407/Kol/2023 Russel Credit Ltd. : AY: 2018-19 in the impugned order on the grounds that the assessed figure of Rs. 12,10,75,318/- should have been adopted instead of Rs. 12,97,56,648/-. 2.4. Regarding the remaining issue of claim of loss on disposal of assets, it has been averred that such loss on disposal of property, plant and equipment of Rs. 96.65 lacs was actually added back in the computation of income as a composite amount comprising of Rs. 96,65,106/- (impugned) and Rs. 6,84,478/- (being net interest paid on income tax), totalling to Rs. 1,03,49,584/-. The Ld. AR pointed out that this working was supplied to the Ld. AO in response to his notice u/s 142(1) of the Act dated 28.12.2020. Various relevant pages in the paper book were pointed out in this regard. 2.5. The Ld. AR concluded his arguments by stating that a full and correct disclosure of facts pertaining to all the three impugned issues was duly made before the Ld. AO and in light of this there was no reason to treat the Ld. AO’s order as being erroneous or prejudicial to the interest of Revenue. 3. The Ld. DR relied on the impugned order and pointed out that the appellant had all along treated the said investments as “stock-in-trade” and when it suited his convenience, he switched over to treating them as capital investments. The Ld. DR also relied on written arguments which were placed on record by him. The Ld. DR painstakingly took us through the audited accounts of the assessee wherein such investments in securities were listed as “stock-in-trade”. It was also pointed out that these audited accounts would necessarily have been approved by the Board of Directors before being adopted. The Ld. DR also averred that on the one hand the audited accounts show them as stock-in-trade but conveniently for tax purposes the gain has been booked under ‘Capital Gain’, to avail of the benefit of setting off the capital loss. The Ld. DR also pointed out that the Ld. AO’s order was not indicative of any conscious acceptance of the assessee’s arguments, in as much as there is no visible discussion in the assessment order regarding the applicability of Instruction dated 7 ITA No. 407/Kol/2023 Russel Credit Ltd. : AY: 2018-19 02.05.2016 (supra). The Ld. DR also pointed out that the Ld. AO had not conducted any enquiry regarding the part 3(iii) of the Instruction dated 02.05.2016 (supra) and thereby the matter was covered under explanation 2(a) to section 263(1) of the Act. 4. We have carefully considered the rival contentions and gone through the documents before us with the help of both Ld. AR/DR. The primary issue that needs to be decided is whether the issues covered in the impugned order were before the Ld. AO or not. Also, whether it can be considered if the Ld. AO has actively examined the material before him and come to conclusions which have been, later, considered to be erroneous and prejudicial to the interest of revenue. Furthermore, what also needs to be considered is whether the appellant was justified in considering the gain from sale of preference shares as LTCG and not business profit/losses, considering that the investments in question were depicted as stock-in- trade in the audited accounts all along. Further, it needs to be considered whether the quantum of brought forward losses could be whatever has been considered in the impugned order or should be as per the assessee’s claim. Finally, it needs to be considered whether the amount of Rs. 96.65 lacs was disclosed and rightly treated by the assessee or needed to be adversely viewed, as has been done in the impugned order. 4.1. Regarding the taxability of gain from sale of preference shares it is an admitted fact that the administrative view expressed in CBDT Circulars and Instruction appears to be that it is best left to the assessee to decide whether the gains from sale of shares would be assessed under the heads of Business and Profession or Capital Gains. The predominant view is seen to be for assessing such gains under “Capital Gains”. In arriving at this conclusion 3 CBDT Instructions/Circulars deserve to be mentioned, with relevant extracts: (i) Circular No. 4/2007, dated 15.06.2007 “10. CBDT also wishes to emphasise that it is possible for a taxpayer to have two portfolios, i.e. an investment portfolio comprising of securities which are to be treated 8 ITA No. 407/Kol/2023 Russel Credit Ltd. : AY: 2018-19 as capital assets and a trading portfolio comprising of stock-in-trade which are to be treated as trading assets. Where an assessee has two portfolios, the assessee may have income under both heads, i.e., capital gains as well as business income. 11. Assessing officers are advised that the above principles should guide them in determining whether, in a given case, the shares are held by the assessee as investment (and therefore giving rise to capital gain) or as stock-in-trade (and therefore giving rise to business profits) The Assessing Officers are further advised that no single principle would be decisive and the total effect of all the principles should be considered to determine whether, in a given case, the shares are held by the assessee as investment or stock-in-trade.” (ii) Circular No. 6/2016 (F.No. 225/12/2016-ITA-II), dated 29.02.2016 “3. Disputes, however, continue to exist on the application of these principles to the facts of an individual case since the taxpayers find it. difficult to prove the intention in acquiring such shares/securities. In this background, while recognizing that no universal principal in absolute terms can be laid down to decide the character of income from sale of shares and securities (1.e. whether the same is in the nature of capital gain or business income), CBDT realizing that major part of shares/securities transactions takes place in respect of the listed ones and with a view to reduce litigation and uncertainty in the matter, in partial modification to the aforesaid Circulars, further instructs that the Assessing Officers in holding whether the surplus generated from sale of listed shares or other securities would be treated as Capital Gain or Business Income, shall take into account the following- (a) 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, (b) In respect of listed shares and securities held for a period of more than 12 months immediately preceding the date of its transfer, if the assessee desires to treat the income arising from the transfer thereof as Capital Gain, the same shall not be put to dispute by the Assessing Officer. However, this stand, once taken by the assessee in a particular Assessment Year, shall remain applicable in subsequent Assessment Years also and the taxpayers shall not be allowed to adopt a different/contrary stand in this regard in subsequent years, (c) In all other cases, the nature of transaction (Le. whether the same is in the nature of capital gain or business income) shall continue to be decided keeping in view the aforesaid Circulars issued by the CBDT. 4. It is, however, clarified that the above shall not apply in respect of such transactions in shares/securities where the genuineness of the transaction itself is questionable, such as bogus claims of Long Term Capital Gain/Short Term Capital Loss or any other sham transactions. 5. It is reiterated that the above principles have been formulated with the sole objective of reducing litigation and maintaining consistency in approach on the issue of treatment of income derived from transfer of shares and securities. All the relevant provisions of the Act shall continue to apply on the transactions involving transfer of shares and securities.” (iii) Letter F. No. 225/12/2016/ITAT II dated 02.05.2016 9 ITA No. 407/Kol/2023 Russel Credit Ltd. : AY: 2018-19 “Regarding characterisation of income from transactions in listed shares and securities, Central Board of Direct Taxes ('CBDT) had issued a clarificatory Circular no. 6/2016 dated 29th February 2016, wherein with a view to reduce litigation and maintain consistency in approach in assessments, it was instructed that income arising from transfer of listed shares and securities, which are held for more than twelve months would be tased under the head Capital Gain' unless the taxpayer itself treats these as its stock-in-trade and transfer thereof as its business income. It was further stated that in other situations, the issue was to be decided on the basis of existing Circulars issued by the CBDT on this subject. 2. Similarly, for determining the tax-treatment of income arising from transfer of unlisted shares for which no formal market exists for trading, a need has been felt to have a consistent view in assessments pertaining to such income. It has, accordingly, been decided that the income arising from transfer of unlisted shares would be considered under the head Capital Gain', irrespective of period of bolding, with a view to avoid disputes/litigation and to maintain uniform approach. 3. It is, however, clarified that the above would not be necessarily applied in the situations where: i. the genuineness of transactions in unlisted shares itself is questionable; or ii. the transfer of unlisted shares is related to an issue pertaining to lifting of corporate veil, or iii. the transfer of unlisted shares is made along with the control and management of underlying business and the Assessing Officer would take appropriate view in such situations. 4. The above may be brought to the notice of all for necessary compliance.” It is seen that at least two of the above-mentioned Circulars/Instructions have been considered by both the Ld. AO and Pr. CIT (especially Instruction dated 02.05.2016). In fact, the Ld. Pr. CIT has used a particular limb of Instruction dated 02.05.2016 (supra) being 3(iii), to hold that enquiries were not conducted by the Ld. AO to determine if the impugned transfer of shares did or did not result in transfer of control and management of, in this case M/s ICICI Bank Ltd., the company in question. In fact, the provision of section 263(1) clause (a) of second Explanation has been invoked to hold that on this point action u/s 263 is certainly due. On this issue it needs to be mentioned that it has been adequately demonstrated that the said Instruction (supra) was before both the Ld. AO and Ld. Pr. CIT even though the same has not been explicitly discussed by the Ld. AO. Even at the expense of over emphasis it needs to be presumed that the Ld. AO was aware of the same while deciding on the taxability of the impugned 10 ITA No. 407/Kol/2023 Russel Credit Ltd. : AY: 2018-19 amount. At this juncture, sustenance is drawn from the case of Pramod Kumar Tekriwal (ITAT/92/2021, ITA No. GA/2/2021), of the Hon’ble Calcutta High Court, in which the following has been held: “The short question involved in these appeals is whether the Principal Commissioner of Income Tax 10, Kolkata [PCIT] could have exercised his powers under section 263 of the Act. In our considered view, the tribunal has elaborately examined this issue, taken note of the decision of the Hon'ble Supreme Court in Malabar Industrial Co. Ltd. vs. CIT [2000] 243 ITR 83 [SC] and allowed the appeal. Further, the tribunal has noted that the assessing officer had made an addition of 2% to the gross profit over and above the rate of gross profit of 4.63% totalling to 7.63%. It appears that after completing the assessment the assessing officer addressed the PCIT stating that certain error has occurred in the assessment order and requested him to review the order under section 263 of the Act. Whether such a procedure adopted by the PCIT was legally sustainable was examined by the tribunal and in our considered view after taking note of the various decisions of the Hon'ble Supreme Court it was rightly pointed out that section 263 of the Act does not permit substituting one opinion for another (emphasis added). That apart, the tribunal has specifically recorded a factual finding that the assessee had produced all necessary details of the purchase, sales, audited books of accounts, quantity details, etc... Further, the tribunal found that the assessee's books of accounts were audited by the Chartered Accountant, the quantity details were given in respect of opening stock, purchase, sales, closing stock, etc. Furthermore, the tribunal pointed out that no discrepancy was found between the purchase shown by the assessee and the sales decline. Thus, on facts, the tribunal concluded that assumption of jurisdiction by the PCIT under section 263 of the Act was erroneous. In our considered view, there is no error in the order passed by the tribunal nor there is any perversity in its approach for us to interfere. We find that there is no question of law, much less substantial question of law arising in this appeal. Consequently, the appeals are dismissed.” The SLP against this case was dismissed on merits (and also on the grounds of limitation) by the Hon’ble Apex Court [295 Taxman 411 (SC)] vide order dated 18.08.2023. In light of the discussion on this issue and the facts mentioned, there is no hesitation in holding that the Ld. Pr. CIT fell in error in presuming that the Ld. AO had not considered the specific directive under Instruction dated 02.05.2016 (supra). Before putting this matter to rest, we have also considered whether, on practical considerations, there is any possibility of change in management in the case of a widely held large Company like M/s ICICI Bank Ltd, through transfer of preference shares (non-participating/non-voting) of the quantum under consideration. The answer appears to be in the negative, leading to a firming of belief that in this particular case an enquiry on part 11 ITA No. 407/Kol/2023 Russel Credit Ltd. : AY: 2018-19 3(iii) of Instruction dated 02.05.2016 (supra) would be a futile exercise, even if permitted. 4.2 Regarding the remaining two issues pertaining to carried forward loss adjustment and the issue of taxability, or otherwise, of Rs. 96.65 lacs, it is clear that the issue of adjustment of loss would be settled once the matter attains finality in appeal proceedings, leaving no scope for any action u/s 263 of the Act. Furthermore, regarding the issue of loss of Rs. 96.65 lacs, it is seen that the Appellant has adequately demonstrated before all the lower authorities that the said amount has duly been considered and added back in the computation of income. 4.3 In light of the discussion above, it is held that the Ld. Pr. CIT fell into an error in exercising his jurisdiction u/s 263 of the Act on all three counts of dispute. This order is accordingly set aside and the appeal of the assessee is allowed. 5. Before parting with this issue, it deserves to be mentioned that the Ld. DR had filed written submissions and had raised a interesting point as under: “(4) In the above context it is submitted that in the said Instruction it was stated that the income arising from the transfer of unlisted shares is to be considered under the head capital gains, irrespective of the period of holding. However, the Instruction is silent about the nature of capital gains i.e. whether it would be treated as long term or short term capital gains. Since as per the Instruction capital gain not to be linked to the period of holding, it is not clear how the said Instruction would have helped to avoid disputes. On the other hand, the assessee had taken the decision for conversation of the stock in trade to capital asset only a short while before the sale of the preference shares. Before such conversion the shares were held as stock in trade and not capital asset. Therefore, deriving any income in the nature of long term capital gains on the sale of these shares was out of question. Since the decision of conversion was taken during the F.Y.2017- 18, the holding period of these shares in the assessee's hands from their alleged date of conversion to capital asset till the date of sale (23.03.2018) must have been less than one year. Consequently, as per the definition(s) in section 2(42A) of the Act the resulting capital gains arising out of the sale should be in the nature of the short term capital gain. Also since brought forward long term capital loss cannot be set off against any income other than the income from long term capital gain as per the provisions of section 74(1)(b), it appears that the impugned Instruction of CBDT does not come to the aid of the assessee in any manner.” 5.1 This issue was not felt necessary to be discussed as part of the operative portion of this order since it pertains to a line of investigation 12 ITA No. 407/Kol/2023 Russel Credit Ltd. : AY: 2018-19 which was neither adopted by the Ld. AO nor was apparently, in the mind of the Ld. Pr. CIT, as there is no mention of this fact in the body of the impugned order. Accordingly, we do not deem it fit to enter into uncalled for aspects of the case merely on the basis of what could have been a fruitful line of enquiry. With these remarks, this aspect deserves to be allowed to rest. 6. In light of findings given above, the appeal of the assessee is allowed. Order pronounced in the open court on 23rd October, 2024. Sd/- Sd/- (Rajpal Yadav) (Sanjay Awasthi) Vice President Accountant Member Dated: 23rd October, 2024 AK, P.S. 13 ITA No. 407/Kol/2023 Russel Credit Ltd. : AY: 2018-19 Copy to: 1. The Appellant: 2. The Respondent. 3. CIT(A) 4. The CIT, 5. DR, ITAT, Kolkata Bench, Kolkata //True Copy// By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata "