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2015 (6) TMI 95 - ITAT DELHISale of shares - business profits or short term capital gains - Held that:- Gains derived from the purchase and sale of shares by the assessee is rightly offered to tax under the head capital gains and not business income. The facts show that out of the total short term capital gain of ₹ 1,75,51,496/- the undisputed fact is that an amount of ₹ 1,39,41,555/- was earned on shares which were held by the assessee for more than 30 days. In fact short term capital gain of ₹ 83,56,196/- was earned on shares which were held for more than 4 months. Similarly the assessee earned capital gains of more than ₹ 40 lakhs for shares which were held for more than 5 months. This is not a characteristic of a trader. There are no borrowed funds. The assessee has always classified the purchases as investments in its books of accounts. In the earlier year the assessee has disclosed capital gains and the AO in the order passed u/s 143(3) accepted the same. On this factual matrix we agree with the contentions of the Ld.Counsel for the assessee that the gains in question cannot be assessed under the head income from business. - Decided in favour of assesse. Disallowance of expenditure under Section 14A - whether disallowance is excessive and unreasonable? - Held that:- Contention of the assessee is not acceptable that the disallowance restricted and upheld by the CIT(A) was incurred for the maintenance of the legal existence of the assessee company when the assessee company is earning exempt dividend income of ₹ 17,27,369 on the average investment of ₹ 32.81 crore, then the disallowance of ₹ 1,65,196/- under section 14A r/w Rule 8D(iii) being the actual expenses claimed by the assessee cannot be held as unjustified. It is pertinent to note that while the company was created for the purpose of real estate business and had not conducted any business in this regard, then the huge exempt dividend income earned from huge average investment of ₹ 32.8 crore cannot be ignored. On the basis of above noted fact, we safely conclude that the legal existence of assessee company during the year under consideration was maintained for the purpose on investments and as such no other business activity was conducted by the assessee during the period. Hence, in our considered opinion, in this situation there is no requirement of bifurcation of claimed expenses viz. for maintaining the legal existence of company and for making investments in shares. At the same time, we are inclined to hold that the CIT(A) was quite justified and reasonable in restricting the amount of disallowance to the amount of expenses claimed by the assessee - Decided against assesse. Loss on sales of shares - whether loss was also business loss and was to deducted from the total income from business? - Held that:- As per calculation of income submitted along with return of income available at page 20 of the paper book, we note that the assessee has shown long term capital loss of ₹ 66,59,311. From bare reading of assessment order, we observe that the issue has not been properly and expressly addressed by the AO while framing assessment order and this issue was not raised by the assessee before the CIT(A) in the first appeal. Hence, we are of the considered view that the contention of the assessee cannot be accepted as the assessee itself has made the claim that the entire income/loss from sale of shares is either long term capital gain or loss or short term capital gain or loss and there was no other business activity of the assessee company during the period under consideration. Hence, as per settled legal position of the Act, the long term capital loss on sale of shares during the year under consideration cannot be deducted and allowed against the business income of the assessee. The AO is directed to provide reasonable treatment to this long term capital loss as per relevant provisions of the Act. - Decided against assesse.
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