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TMI Blog2014 (4) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the CIT(A) – Decided against Revenue. Addition of STCG as business profit – Held that:- Assessee as well as revenue both are in appeal - At the time of hearing counsel of the assessee reiterated the submissions made before lower authorities and also highlighted certain portion of those submissions and relied upon case laws - it would not be proper to accept the submissions without getting them verified – thus, the matter is required to be remitted back to the AO for fresh adjudication – Decided in favour of Revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... t thereof has been incurred for earning exempted income. (e) For this we relay upon Delhi I.T.A.T. decision in the case of CIT Vs. Eicher limited 101 TTJ 369 wherein it is held that the " expenditure which the A.O. seeks to disallow u/s. 14A should be actually incurred, so in the absence of any material to show any nexus nothing could be disallowed." Reliance is also placed on the decision of Hon'ble ITAT, Kolkata 'D' Bench, in the case of EIH Associated Hotels Ltd. vs. Dy. CIT 16 DTR (Kol) (Trib) 181 wherein vide para 15 it is held that; " We have considered the rival contentions put forward both by the Authorized Representative and Departmental Representative. While considering the Revenue's contention that the disallowance has been made u/s.14A mainly on assumptions that assessee had incurred huge management expenses and paid interest on borrowed funds, on the other hands, we agree with the contentions and the case references cited by the Authorized Representative that therefore was no expenditure incurred in connection with the earning of the dividend. Considering the relevant facts of the case we fee that in the interest of justice the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied with the explanation of the assessee. In the instant case, the explanation of the assessee company is not satisfactory and accordingly, the method of determining amount of expenditure in relation to income not includible in the total income specified in the Rule *D is followed. The expenditure relating to investment earned for earning exempt income is calculated as under as per Rule 8D; Aggregate of three i.e. (i) Direct Exps.- (share expenses) 42282 42282 + (ii) AxB/C A= amt. of expenditure by way of interest if any 3673175 B= Avg. value of investment (22967645=12852175)/2 17909910 C= Avg. value of assets (92594118+9723478)/2 94915798 AxB/C 693100 693100 +(iii) one-half of the avg. value of investment i.e. 0.5 of Rs. 8950 89550 824932 Therefore, in view of the provisions of Rule 8D of the Income tax Rules, 1962, expenses to the extent of Rs. 824392/- is allowed and added to the total income of the assessee company." 4. In appeal Ld. CIT(A) after taking into consideration the submission of the assessee which has been reproduced by him in para. 4.2 of his order has restricted this addition to Rs. 89,550/- instead of Rs. 8,24,392/- made by AO. 5. Aggrieved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held by the hon'ble Mumbai High Court in the case of Godrej Boyce vs. CIT wherein it has held that though rule 8D is not retrospective the same be applied in case where it is not possible to compute the disallowance otherwise. 4.2(ii) In so far as the cost of employees as also other expenses including depreciation are concerned, it is the argument of the appellant that these expenses are mainly for the business of the appellant and cannot be correlated to the income from dividends or to the investment in shares. It is seen that during the year the investment of the appellant in shares have gone down from Rs. 2,29,67,645/- last year to Rs. 1,28,52,1757-. Thus it is seen that the appellant has sold shares worth more than one crore. There is no justification in the contention of the assessee that no expenses were incurred for handling these investments particularly when such large No. of shares have been sold. This requires administrative costs as well as other costs related to use of assets. The action of the AO therefore in holding that expenses in the form of administrative costs were attributable to dividend income is correct. It is also seen that the appellant himself has al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in possession through IPO's. {4} We also done business of share trading being F & O and speculation under the separate portfolio. {5} We further submit and state that (1) We have maintained detail and record for name of the company(2) Date of purchase (3) No. of shares (4) Rate and (5) an amount of consideration similarly same narration have kept in respect of sales and also maintained the records of showing the period of holding and the resulting profit on sale of the shares and terms of long term capital gain and short term capital gain as the case may be and past also similar isolated transaction record was maintained. {6}. We submit that our primary intention was not to enter into the venture of trade but only to generate an alternative income. Thus the intention behind such a venture is to get appreciation on the investments, {7}. That the circular No.4/2007 dated ; 15/06/2007 issued by the Central Board of Direct Taxes, lays guidelines to Assessing Officers to treat it such an event. Though there are no clear cut distinctions earmarked therein, however, it is instructed that broad perspectives should be borne in mind while treating a venture as 'trade' o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he principles laid down by the Apex Court in the above two cases afford adequate guideline for distinction between shares held as investment (capital asset) and shares held as stock-in-trade (trading asset). No evidence as to whether separate portfolios in respect of shares held by way of stock-in-trade and shares held by way of investment is furnished. The Authority for Advance Rulings (AAR) (288 ITR 641), referring to the decisions of the Supreme Court in several cases, has culled out the following principles: (i). the substantial nature of transactions, the manner of maintaining books of accounts, the magnitude of purchases and sates and the ratio between purchases and sales and the holding would furnish a good guide to determine the nature of transactions. (ii). ordinarily the purchase and sale of shares with the motive of earning a profit, would result in the transaction being in the nature of trade / adventure in the nature of trade; but where the object of the investment in shares of a company is to derive income by way of dividend etc. then the profits accruing by change in such investment (by safe of shares) will yield capital gain and not revenue receipt. The firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortfolios i.e. investment portfolio comprising of shares and securities which are treated as capital assets and a trading portfolio comprising of stock-in-trade which are to be treated as trading assets. Considering the above discussion, facts of the case and various factors mentioned in the circular No. 4 dated 15.06.2007, the profit/gains arising on dealing with the shares of the companies of Rs. 3,22,144/- can not be treated as Short term capital gain. Therefore, profit/gains earned from sale of such share is treated as business income instead of short term capital gain as shown by the assessee company." 10. Ld CIT(A) after taking into consideration the submission of the assessee which has been reproduced by him in para 5.1 of the order has directed the AO to treat the gain arising from investment in shares held for less than 30 days as business income and to re-calculate the disallowance accordingly. 11. Against this order of Ld. CIT(A) assessee as well as revenue both are in appeal before us. At the time of hearing learned counsel of the assessee reiterated the submissions made before lower authorities and also highlighted certain portion of those submissions. She als ..... X X X X Extracts X X X X X X X X Extracts X X X X
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