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TMI Blog2016 (12) TMI 1246X X X X Extracts X X X X X X X X Extracts X X X X ..... alculating the quantum of disallowance afresh after considering all the aspects as envisaged in section 14A and Rule 8D after giving due opportunity to the assessee to represent its case. The grounds pertaining to the issue of disallowance u/s 14A are accordingly allowed for statistical purposes. - ITA No. 4144/Del/2011 - - - Dated:- 18-4-2016 - SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER For The Appellant : Shri Subodh Gupta, CA For The Respondent : Shri Rajiv Ranka, Sr. DR ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER The present appeal is preferred by the assessee against the order passed by the Ld.CIT(A)-XXI, New Delhi wherein by the order dated 26.07.2011 the First Appellate Authority has confirmed the action of the Assessing Officer in treating an amount of ₹ 40,04,179/- as business income instead of Capital Gains (as claimed by the assessee) and also upholding the disallowance of ₹ 4,90,274/- u/s 14A of the Income Tax Act, 1961 (hereinafter called the Act ). The appeal pertains to assessment year 2008-09. 2. It is seen from the records that the assessee company had filed it return of income d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... @ 0.5% on the average investments. 3. In appeal, the Ld. CIT (A) confirmed both the disallowances/adjustments and now the assessee is in appeal before us and has raised the following grounds of appeal:- 1. The lower authorities have erred and were not justified on facts circumstances of the case and in law in rejecting the results and accounting treatment of impugned transactions shown in the audited accounts as investments in the audited accounts, indicating unambiguously the intentions of making Investments and thus the adverse inferences are liable to be rejected. 2. On facts and circumstances of the case and in law, the lower authorities have erred and were not justified in treating the net results of gain, amounting to ₹ 40,04,179/-, from investments in units of mutual funds Portfolio Management Scheme (PMS) as Trading , chargeable under the head Profit gains of Business of Profession as against the claim of the appellant to charge under the head Capital gains . On the facts and circumstances of the case, it is the case of the appellant that can only be construed as investment in units of mutual funds and not as Business . 3. On facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14A, the Ld. DR submitted that the assessee has itself not disputed the application of section 14A and hence, the disallowance has been correctly made. 8. We have heard the rival submissions and perused the material on record. As far as the issue of treating capital gains as business income by the Department is concerned, it is seen that the issue has been settled in favour of the assessee by the Hon'ble Delhi High Court in I.T.A. No. 1658/2010 for Assessment Year 2006-07. We accordingly restore the matter to the file of the Assessing Officer for allowing assessee s claim in terms of the order of the Hon'ble Delhi High Court. The grounds of the assessee on this issue are accordingly allowed. 9. As regards the issue of disallowance u/s 14A of the Act, it is seen that the scheme of section 14A has within it implicit notion of apportionment in cases where the expenditure is incurred for the composite/indivisible activities in which taxable and nontaxable income is received. But when it is possible to determine the actual expenditure in relation to the exempt income or when no expenditure has been incurred in relation to the exempt income, then principle of apportionment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of Maxopp Investment Ltd. vs CIT (I.T.A. 687/2009) has opined in para 29 of the order as under:- 29. Sub-section (2) of Section 14 A of the said Act provides the manner in which the Assessing Officer is to determine the amount of expenditure incurred in relation to income which does not form part of the total income. However, if we examine the provision carefully, we would find that the Assessing Officer is required to determine the amount of such expenditure only if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under the said Act. In other words, the requirement of the Assessing Officer embarking upon a determination of the amount of expenditure incurred in relation to exempt income would be triggered only if the Assessing Officer returns a finding that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Therefore, the condition precedent for the Assessing Officer entering upon a determination of the amount of the expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X
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