2015 (10) TMI 537 - AT - Income Tax

Gains on sale of shares - capital gain v/s business income - Held that - We find while holding the gains on sale of shares to be capital gains, ld. CIT(A) has given a finding that the facts of the case in the year under appeal are identical to that of A.Y. 05-06 & 07-08 and further during the year under appeal the number of transactions are small, the shares were purchased for investment purpose and were not made out to borrowed funds. Before us, Revenue has not brought any material to controvert the findings of ld. CIT(A). We further find that against the order of Tribunal, the matter was carried by Revenue before Hon ble High Court and the appeal of Revenue was dismissed by the Hon ble Gujarat High Court. We further find that the facts of the case relied upon by ld. D.R. are distinguishable and not applicable to the present facts. In view of the aforesaid facts, we find no reason to interfere with the order of ld. CIT(A) and thus the ground of Revenue is dismissed. - Decided in favour of assessee. Disallowance u/s 14A - Held that - CIT(A) while upholding the disallowance u/s. 14A made by A.O, has given a finding that during the appellate proceedings, Assessee had not challenged the computation of disallowance and the disallowance made by the A.O was as per provisions of Section 14A read with Rule 8D of I.T. Rules, 1962. Before us, ld. A.R. has not brought any material on record to controvert the findings of ld. CIT(A) and therefore we find no reason to interfere with the order of ld. CIT(A). - Decided against assessee.

Summary

Issues:
1. Treatment of capital gains as business income.
2. Disallowance under section 14A of the Income Tax Act, 1961.

Issue 1: Treatment of Capital Gains as Business Income:
The case involved two appeals, one by the Assessee and the other by the Revenue, against the order of CIT(A)-XI, Ahmedabad for A.Y. 2008-09. The Assessee declared total income of &8377; 3,31,270/-, which was later determined at &8377; 47,52,420/ by the assessing officer (A.O.). The dispute arose over the classification of income from the sale of shares as either "business income" or "capital gains." The A.O. considered the profit on the sale of shares as business income due to the frequency and scale of share transactions. However, the ld. CIT(A) held in favor of the Assessee, directing the A.O. to treat the income as short term capital gains and long term capital gains. The ld. CIT(A) based this decision on past relief granted to the Assessee in similar cases and various factors such as the nature of investments, absence of borrowed funds, and the small number of transactions. The Revenue appealed against this decision, but the Tribunal dismissed the appeal, noting the lack of material brought by the Revenue to challenge the findings of the ld. CIT(A). The Tribunal also highlighted that the Hon'ble High Court had previously dismissed the Revenue's appeal on similar grounds. Therefore, the Tribunal upheld the decision of the ld. CIT(A) regarding the treatment of capital gains as capital gains and not business income.

Issue 2: Disallowance under Section 14A of the Income Tax Act, 1961:
The second issue pertained to the disallowance under section 14A of the Income Tax Act, 1961. The A.O. disallowed &8377; 6,79,739/- under section 14A, as the Assessee had shown a significant investment but had only disallowed &8377; 72,389/- suo motu. The ld. CIT(A) upheld the A.O.'s decision, citing the provisions of Rule 8D and the amendments to section 14A. The ld. CIT(A) noted that the Assessee failed to provide documentary evidence to prove that borrowed money was not utilized for investments and did not challenge the computation of disallowance during the appellate proceedings. The Tribunal, after hearing both sides, found no reason to interfere with the ld. CIT(A)'s decision. The Tribunal emphasized that the disallowance made by the A.O. was in accordance with the provisions of Section 14A read with Rule 8D of the Income Tax Rules, 1962. Therefore, the Tribunal dismissed the Assessee's appeal regarding the disallowance under section 14A.

In conclusion, the Appellate Tribunal, ITAT Ahmedabad, in its judgment dated 04 - 09 - 2015, dismissed the appeals of both the Revenue and the Assessee, upholding the decisions of the ld. CIT(A) on both issues of treatment of capital gains as business income and disallowance under section 14A of the Income Tax Act, 1961.