2015 (6) TMI 488 - AT - Income Tax

Profit resulted from share dealings - short term capital gains or business income - Held that - Assessee company was originally engaged in the business of investment and financing. The assessee has converted the trading stock into investment by passing a resolution on 30.07.2004. The net value of closing stock of shares as on 30.07.2004 was at 25, 97, 534/- and the credit value was at 35, 20, 077/-. The company offered the difference of 9, 22, 543/- for taxation but the AO treated the entire conversion of stock into investment at 35, 20, 077/- as business income in view of the provisions of section 45(2) of the Act. We find that this issue is covered by the decision of ACIT Vs. Bright Star Investment Pvt. Ltd. 2008 (7) TMI 442 - ITAT BOMBAY-H . In view of the above we find no infirmity in the order of CIT(A) deleting the addition made by AO on account of profit arising from sale of share dealing as business income as against declared by assessee as Short term Capital Gains - Decided in favour of assessee. Disallowance of Foreign travel expenses of Director - CIT(A) deleted addition - Held that - since domestic and foreign travelling of Mrs. Madhurika Khaitan an executive and employee of the company was for the purpose of business promotion. Therefore the addition made by the A.O. on this ground is not sustainable. - Decided in favour of assessee. Addition on account of donation - CIT(A) deleted addition admitting fresh evidence - Held that - the assessee has submitted ATG Certificate of the donee Durga Prasad Khaitan Charitable Trust along with a receipt of donation of 50, 000/-. According to us this is new evidence which requires verification. Ld. Counsel for the assessee also not objected to the same. In term of the above we set aside this issue to the file of AO for verification and decide the issue as per law. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Treatment of profit from share dealings as business income or short term capital gains.
2. Disallowance of foreign travel expenses of a Director.
3. Addition made on account of donation by admitting fresh evidence.

Issue 1:
The first issue revolves around the treatment of profit from share dealings as business income or short term capital gains. The Appellant Revenue challenged the CIT(A)'s decision to delete the addition made by the Assessing Officer (AO) regarding the profit arising from the sale of shares. The AO treated the sale of shares as business income, whereas the assessee declared it as short term capital gains. The CIT(A) allowed the appeal of the assessee by relying on the decision of the Mumbai Tribunal in a similar case. The Tribunal upheld the CIT(A)'s decision, stating that the conversion of trading stock into investment was in line with the provisions of the Income Tax Act. Therefore, the Tribunal dismissed the Revenue's appeal on this issue.

Issue 2:
The second issue concerns the disallowance of foreign travel expenses of a Director. The Revenue appealed against the CIT(A)'s decision to delete the addition made by the AO on account of these expenses. The AO disallowed the expenses as they were incurred by a non-executive director. However, during the appellate proceedings, it was clarified that the director in question was an employee of the company and the expenses were for business purposes. The CIT(A) allowed the expenses as business expenses, emphasizing that the travel was for business promotion. The Tribunal confirmed the CIT(A)'s decision, stating that the expenses were justified as they were incurred for business purposes.

Issue 3:
The final issue revolves around the addition made on account of a donation by admitting fresh evidence. The Revenue challenged the CIT(A)'s decision to delete the addition towards the donation, citing a violation of Rule 46A. The assessee submitted new evidence, including an ATG Certificate of the donee and a receipt of donation. The Tribunal found this to be new evidence requiring verification and hence set aside the issue to the AO for further examination. The Tribunal allowed the Revenue's appeal on this issue for statistical purposes.

In conclusion, the Tribunal partly allowed the Revenue's appeal for statistical purposes, confirming the decisions of the CIT(A) on the treatment of profit from share dealings and foreign travel expenses while remanding the issue of donation for further verification by the AO.