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2018 (4) TMI 1670 - ITAT PUNEGains earned from share transactions engaging PMS [Portfolio Management Service] - characterization of income - correct head of income - capital gain or busniss income - HELD THAT:- As decided in YUSMARG INVESTMENT & TRADING PVT. LTD., VERSUS THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE – 7, PUNE AND VICE-VERSA [2017 (5) TMI 1666 - ITAT PUNE] we confirm the order of CIT(A) holding the activity of purchase and sale of shares by engaging PMS constitutes an investment activity and the resultant gain/loss is assessable under the head capital gains. The ground raised by the Revenue is dismissed. Disallowance u/s 14A r.w.r.8D - non recording of satisfaction by AO before resorting to quantification of disallowance u/s.14A - assessee disallowed the entire PMS fee - HELD THAT:- AO has not recorded the satisfaction of any kind before resorting to quantification of disallowance u/s.14A r.w. Rule 8D of the I.T. Rules, 1961. It is settled legal proposition that the AO is under obligation to give a satisfaction in writing having regard to the books of account of the assessee, before rejecting the assessee’s claim of quantification of disallowable expenditure relatable to the earning of exempt income. In this case, assessee disallowed the entire PMS fee – the only expenditure incurred by him for earning of the exempt income. Without giving any satisfaction and reasons AO rejected the same before applying the said provisions and disallowing. In our view, this kind of approach of the AO is unsustainable in law. Thus disallowance made by the AO is required to be deleted in the absence of any satisfaction recorded by him while making disallowance u/s.14A of the Act. See CAPGEMINI TECHNOLOGY SERVICES INDIA LIMITED, VERSUS THE DY. COMMISSIONER OF INCOME TAX, AND VICE-VERSA [2018 (3) TMI 540 - ITAT PUNE] - Decided in favour of assessee.
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