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TMI Blog2015 (8) TMI 1202X X X X Extracts X X X X X X X X Extracts X X X X ..... tal/pre-operative in nature. Accordingly we set aside the order of Ld CIT(A) on this issue and direct the AO to allow the deduction towards foreign travel expenses.- Decided in favour of assessee. Assessment of Short term capital gain arising on sale of shares as business income - AY 2008-09 - Held that:- The assessee has accumulated the shares initially in instalments and later sold them in instalments. As in last year, no interest bearing funds have been used and average holding period is about 180 days. The assessee has held the same as its investment. The assessee has declared the gains under the head business in respect of shares held as trading asset. All these factors support the contention of the assessee that the shares of M/s Balaji Telefilm Ltd were held as investment. Accordingly, we hold that the tax authorities are not justified in assessing the profit generated on sale of shares of M/s Balaji Telefilm Ltd as business income, that too, without bringing any other material on record. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to assess the same under the head “Short term Capital Gain”.- Decided in favour of assessee. Disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly assessed the same as business income. 4. In assessment year 2007-08, the assessee had claimed foreign travelling expenses to the tune of ₹ 11.84 lakhs. The AO took the view that this expenditure was not related to the existing business, but it has been incurred for exploring new business opportunity. Accordingly, the AO took the view that it is in the nature of capital expenditure or pre-operative expenses. Though the assessee explained that it has incurred foreign travelling expenses for expansion of its business in foreign countries, the AO took the view that the assessee did not specify the purpose of expenditure. In view of the above, he disallowed the claim of foreign travel expenses. 5. In the assessment year 2008-09, the assessee had declared the dividend income of ₹ 42.05 lakhs. The assessee has disallowed ₹ 2.07 lakhs under section 14A of the Act. However, the AO proceeded to compute the disallowance u/s 14A of the Act as per the provisions of Rule 8D of the Income Tax Rules, 1962 and the same worked out to ₹ 13.57 lakhs. The AO disallowed the above said amount u/s 14A of the Act. 6. In the appellate proceeding, the ld. CIT(A) c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is now well settled proposition that a person is entitled to maintain two separate portfolios, one for its investment and another one for its trading assets. For this proposition, one may gainfully refer to the Circular No.4/2007 dated 15-06-2007 issued by the CBDT and also the decision rendered by Hon ble Bombay High Court in the case of Gopal Purohit (2010)(228 CTR 582). In the instant case, the assessing officer has not disproved the claim of the assessee that it has maintained two different portfolios as discussed above. Even though the Ld CIT(A) has observed that the question whether transactions were in the nature of trade or otherwise is largely dependent upon the facts of each case, yet we are of the view that the Ld CIT(A) has not properly appreciated the facts prevailing in the instant case. In our view, the discussions made by us in the preceding paragraphs clearly show that the intention of the assessee at the time of purchase of shares of M/s Adani Enterprises Limited was to hold it as its investments. We notice that the assessing officer has not brought any material on record to show the contrary, which means that the AO has arrived at the adverse conclusion only on s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses are capital/pre-operative in nature. Accordingly we set aside the order of Ld CIT(A) on this issue and direct the AO to allow the deduction towards foreign travel expenses. 10. Now, we shall take up the appeal filed for AY 2008-09. The first issue relates to the assessment of Short term capital gain arising on sale of shares as business income. As in last year, the assessee has maintained two separate portfolios, viz., one for share investment activity and another one for share trading activity. In the investment category, the assessee has dealt with only one share viz., M/s Balaji Telefilms Ltd. The various criteria discussed in the immediately preceding year with regard to the investment made in M/s Adani Enterprises Ltd are equally applicable to the investment made in M/s Balaji Telefilms Ltd, i. E., except one case of repetition of small magnitude, there is no repetition of purchase and sale. The assessee has accumulated the shares initially in instalments and later sold them in instalments. As in last year, no interest bearing funds have been used and average holding period is about 180 days. The assessee has held the same as its investment. The assessee has decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in connection with some other activity. It is submitted that the profit earned on sale of painting was offered to tax. The legal and professional fee was paid to Vatsala K towards advising for real estate deal with M/s K. V. Property ventures Pvt Ltd and hence it is also a direct expenditure. The travelling expenses were claimed to have been incurred in connection with the regular business activities only. Accordingly, if we exclude the above said expenditure, the remaining indirect expenses works out to ₹ 1,08,911/- only, where as the assessee itself has disallowed a sum of ₹ 2,07,022/- u/s 14A of the Act while computing the total income. Under these set of facts, in our view, the provisions of Rule 8D should not applied in the instant case, since the disallowance computed under Rule 8D works out to disproportionately higher figure of ₹ 13,57,011/-. Hence, considering the facts discussed above, we are of the view that the disallowance of ₹ 2,07,022/- made by the assessee does not call for any interference. In view of the above, we set aside the order of Ld CIT(A) on this issue and direct the AO to restrict the disallowance u/s 14A of the Act to the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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