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Issues involved: Appeal against ITAT order regarding addition u/s 14A and classification of capital gains as business income.
Addition u/s 14A: The issue pertains to the addition of Rs. 53,027 made under Section 14A of the Income Tax Act, 1961. The CIT(A) deleted the addition based on the availability of interest-free funds with the assessee. The Tribunal concurred with this reasoning, noting the business activities of the assessee in manufacturing products. The Assessing Officer disallowed a proportionate interest on new share investments, but CIT(A) found that interest-free funds were used for investments, leading to the deletion of the amount. The Tribunal upheld this decision, emphasizing the substantial share capital and reserves of the assessee, dismissing the Revenue's appeal. Classification of Capital Gains: The second issue involves treating Rs. 7,85,405 as short-term capital gain and Rs. 7,94,796 as long-term capital gain instead of business income. The Assessing Officer considered the gains from share transactions as business income due to regular trading activities. However, CIT(A) disagreed, citing the absence of a principal object of dealing in shares in the Memorandum of Association. The Tribunal supported the assessee, highlighting the registration of shares in its name and the lack of evidence to prove share trading as the main activity. The Tribunal concluded that the assessee cannot be deemed a trader in shares, especially when the primary business was manufacturing detergent cakes. The Appeal was dismissed, affirming the Tribunal's decision without any fault found in its reasoning.
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