9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (8) TMI 658 - AT - Income TaxBusiness income or capital gain - Income from purchase and sale of shares - Held that - a perusal of the facts of the present case clearly shows that no borrowed funds had been used by the assessee for the purchase and sale of shares. Further, a perusal of the list of shares as also the details of the short -term capital gains clearly shows that the assessee is not regularly purchasing and selling shares in a systematic manner to be termed as business . Substantial portion of the gains as disclosed by the assessee is admittedly from the sale of shares, which have been purchased from IPOs and public offers. It cannot be said that the assessee is regularly and systematically doing any business of purchase and sale of shares. Further, the fact that for the earlier and subsequent years, the Revenue has accepted the similar transact ions in the hands of the assessee being taxed as short -term capital gains also goes in favour of the assessee - Following decision of Radhasoami Satsang Versus Commissioner of Income-Tax 1991 (11) TMI 2 - SUPREME Court - Decided in favour of assessee.
Issues Involved:
1. Applicability of Rule 8D of the Income Tax Rules, 1962 for the assessment year 2006-07. 2. Disallowance of expenses related to earning dividend income under Section 14A of the Income Tax Act, 1961. 3. Classification of income from purchase and sale of shares as either Short Term Capital Gains or business income. 4. Treatment of interest income as either income from business or income from other sources. Issue-wise Detailed Analysis: 1. Applicability of Rule 8D of the Income Tax Rules, 1962 for the assessment year 2006-07: The assessee argued that Rule 8D, introduced on 24th March 2008, should not apply to the assessment year 2006-07, as Section 14A(2) of the Act, under which Rule 8D was inserted, was effective from 1st April 2007 and applicable from the assessment year 2007-08. The Tribunal noted that the CIT(Appeals) erred in holding Rule 8D applicable for the assessment year 2006-07 and directed the Assessing Officer to restrict the disallowance under Section 14A to 1% of the exempt income, consistent with the decision of the Hon'ble Calcutta High Court in the case of R.R. Sen & Brothers (Pvt.) Ltd. 2. Disallowance of expenses related to earning dividend income under Section 14A of the Income Tax Act, 1961: The assessee contended that no expenses were incurred for earning dividend income and that the disallowance of Rs.54,523/- on a proportionate basis under Rule 8D was erroneous. Additionally, the disallowance of Rs.3,03,718/- under Section 14A was made without basis or material. The Tribunal agreed with the assessee, directing that the disallowance under Section 14A be restricted to 1% of the exempt income, in line with the decision of the Hon'ble Calcutta High Court. 3. Classification of income from purchase and sale of shares as either Short Term Capital Gains or business income: The Revenue argued that the income from the purchase and sale of shares should be treated as business income due to the frequency, magnitude, and volume of transactions, as well as the use of borrowed funds. The CIT(Appeals) had upheld the assessee's classification of the income as Short Term Capital Gains. The Tribunal found that no borrowed funds were used by the assessee for these transactions, and a substantial portion of the gains came from IPOs and public offers. The Tribunal noted that similar transactions in previous and subsequent years were accepted as Short Term Capital Gains by the Revenue. Therefore, the Tribunal upheld the CIT(Appeals) decision, treating the income as Short Term Capital Gains. 4. Treatment of interest income as either income from business or income from other sources: The Revenue contended that the interest income should be treated as income from other sources, while the CIT(Appeals) treated it as income from business, consistent with the treatment in earlier years. The Tribunal observed that the Revenue had consistently treated the interest income as business income in previous assessments, and no reason was provided for changing this treatment for the year under appeal. The Tribunal upheld the CIT(Appeals) decision, treating the interest income as business income. Conclusion: - The appeal of the Revenue in ITA No. 1216/Kol./2009 was dismissed. - The appeal of the Revenue in ITA No. 1282/Kol./2010 was dismissed. - The appeal of the assessee in ITA No. 1140/Kol./2009 was partly allowed. - The appeal of the assessee in ITA No. 1247/Kol./2010 was partly allowed.
|
