2014 (7) TMI 964 - HC - Income Tax

Nature of transaction STCG in investment and not trading Held that - The assessee has held 4 scrips for a period of more than 6 months during the year and 5 scrips have been held for 3 to 5 months, while the remaining have been sold within a period of 30 days assessee had no intent of holding on to the shares - the Tribunal has failed to note is that mere treating the transaction separately in the books of account would not assist the assessee - If the Tribunal does not hold that the concurrent findings are perverse, then, all the more, this question is a substantial question of law. Insurance premium paid Insurance policy covers the period of next financial year - Held that - The Tribunal was of the view that there is no dispute regarding the allowability of keyman insurance - The disallowance was made by the AO only because the assessee took the insurance policy on the last date of the financial year - expenditure came during the financial year relevant to the assessment year - the insurance policy cover is extended to the next financial year does not mean that the premium paid during the year under consideration is not an allowable expenditure Decided against Revenue.

Summary

Issues:
1. Nature of transaction - Short-term capital gain as investment or trading
2. Disallowance under section 14A
3. Allowability of insurance premium paid

Analysis:

Issue 1: Nature of transaction - Short-term capital gain as investment or trading
The revenue challenged the order of the Income Tax Appellate Tribunal regarding the nature of the transaction representing short-term capital gain. The revenue contended that the Tribunal erred in reversing the concurrent finding of facts, arguing that the transaction was not appreciated correctly. The Assessing Officer's findings highlighted the huge turnover and detailed the sale and purchase of shares, indicating the scale of operation and massive borrowing for trading purposes. The Commissioner affirmed these findings, emphasizing that the Tribunal failed to consider the Supreme Court's tests and the intention behind holding shares. The Tribunal, after a thorough analysis, concluded that the transactions were for investment purposes, not trading, based on the frequency of transactions, volume of investments, and relevant tests. The Court upheld the Tribunal's decision, stating that it was not reversing the findings arbitrarily but based on a correct appreciation of facts.

Issue 2: Disallowance under section 14A
The second question raised whether the disallowance under section 14A should be set aside for fresh consideration by the Assessing Officer. The revenue conceded that a judgment favored the assessee in this regard, leading to a decision against the revenue.

Issue 3: Allowability of insurance premium paid
Regarding the insurance premium paid by the assessee, the Assessing Officer disallowed a proportionate amount as the premium was paid on the last day of the financial year. However, the Tribunal held that since the expenditure pertained to the relevant assessment year, it was allowable, despite the policy covering the next financial year. The Court agreed with the Tribunal's reasoning, stating that the peculiar facts and circumstances of the case supported the allowability of the premium paid during the assessment year.

In conclusion, the Court dismissed the appeal, upholding the Tribunal's decisions on all three issues. The Court found no grounds to term the Tribunal's conclusions as perverse or vitiated by any error of law, leading to the dismissal of the appeal without costs.