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TMI Blog2017 (5) TMI 479X X X X Extracts X X X X X X X X Extracts X X X X ..... ly aggrieved to this proposition. Accordingly respectfully following precedent from tribunal in assessee’s own case as above we remit the issue to the file of A.O with similar direction to examine the issue accordingly. - ITA no.1766/Mum./2013, ITA no.1598/Mum./2013, & ITA no.5043/Mum./2014 - - - Dated:- 3-5-2017 - SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER, AND SHRI RAVISH SOOD, JUDICIAL MEMBER For the Assessee : Shri. Prakash Jotwani For the Revenue : Shri. Rajesh Kumar Yadav ORDER PER: SHAMIM YAHYA These are cross appeal by the revenue and assessee directed against order of CIT-A for assessment year 2009-10, 2010-11 respectively. 2. The grounds of appeal read as under: The revenue‟s appeal assessment year 2009-10 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in treating the amount of ₹ 2,16,114/- received by the assessee from the sale of mutual funds units as long term capital gain as against its being taxable as business income since the assessee is engaged in the business of trading in shares. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounted under the head 'Capital Gains' and not Business Income. 2. Disallowance u/s. 14A a. The Ld. CIT(A) erred in making an adhoc disallowance u/s. 14a r.w. Rule 8D of ₹ 65,11,822/- being estimated expenses which have been incurred on earning tax free income of ₹ 23,08,970/- (being Dividend income). b. The Ld. CIT(A) erred in not considering that no expense can be disallowed, if the nexus cannot be established for incurring expenditure for earning tax free income and section 14a cannot be merely applied on presumption. c. Without prejudice, the Ld. AO failed to take into consideration that Rule 8D(2)(ii) (iii) is not applicable where the income arising on sale of securities is chargeable to tax as Business Income, since s.14A r.w. Rule 8D are not applicable to traders who deal in shares as is held in the decisions of:- DCIT vs. Gulshan Investment Co. Ltd (ITAT Kolkatta)-14.03.2013 DCIT vs. India Advantage Securities Ltd. (ITAT Mumbai)-12.10.2012 Yatish Trading Co. Ltd vs. ACIT (129 ITD 237(Mum) CIT vs. Smt. Leena Ramachandran (339 ITR 296 (Ker. HC) 3. Prior Period expences: The Ld. CIT(A) erred in confirming the addition in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also placed his reliance in the case of Dalhousie Investment Trust Company vs. CIT (968) 68 ITR 490,491 (SC). In para 4.6 Assessing Officer has described purchase and sale of I various securities and thereafter, has reach to the conclusion that appellant has indulged itself in business of shares and securities and hence according to him such loss is a business loss and not a capital loss. 3.3 Upon assessee s appeal Ld. CIT-A confirmed the AO action by holding as under: I have considered the finding of the AO as well as rival submission of the appellant, carefully. I find that arguments of Ld. A.R. is untenable because of the fact that appellant is apparently in investment business doing shares transactions. Ld. Assessing officer has rightly pointed out in para 4.3 that appellant itself has admitted that this company is primarily an investment company hence whatever earning is there is out of business activities. They pattern of share transactions clearly shows that the intents and motives of the assessee are that of trader in pursuit of profit rather than an investor. It can be seen from the details that on 01.08.2008 appellant has purchased 2500 shares of Kotak Mahindra B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities also bears loss. Therefore, it cannot be presumed that appellant's intention is only to earn dividend out of investment. The period of holding of shares, frequency of sale of shares, the circumstances responsible for the sale of shares and the presence of discernible motive for the purchase of the shares and the treatment of shares and profit and loss, prove that appellant is in business activities. Therefore, I also reach to the conclusion that appellant has done business activities and comes under the purview of Section 2(3) of the LT. Act. Thus, the finding of the Assessing Officer that an amount of ₹ 3,15,58,406/- is a business loss and is not short term capital loss. As such finding of the Assessing Officer is approved. 3.4 Against above order assessee is in appeal before us. We have heard both the counsel and perused the records. Ld. Counsel of the assessee submitted that this tribunal in assessee s own case in ITA No. 8870/Mum/2011 and 8699/Mum/2011for assessment year 2008-09 has decided the same issue in favour of the assessee vide order dated 14.01.2015. Furthermore Ld. Counsel of the assessee submitted that assessee is engaging into the investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue. The appeal of the revenue, thus having no merit is therefore dismissed. The assessee before us has submitted that the transactions were carried out through investment manage. It was submitted by the assessee company that 13,000 shares of the Kotak Securities Ltd were directed to be purchased to the investment manage, however, mistakenly 25000 shares were purchased by it. It was immediately directed to restrict the purchases to 13000 shares and rest of the 12000 shares were sold on the same day by incurring loss. The assessee did not carry out any other share transaction during the year. This was the singly transaction done by the assessee during the year. The shares of other companies purchased were held as investment. In view of the above explanation given by the assessee, in our view, the action of the lower authorities in treating the said loss resulting from single transaction of sale of shares for which the assessee has given the plausible explanation, cannot be held to be justified. This issue is accordingly decided in favour of the assessee and it is directed that the said loss to be treated as short term capital loss. 3.6 Furthermore we also note that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applies to the facts of the case. Thus in earlier year similar transactions were treated by the ITAT as transactions of investment giving rise capital gains/loss. Furthermore Hon ble Delhi High Court has held that investment activity through PMS agreement doesn t given arise to business activity of making profit. Hence we hold that assessee s investment activity cannot be held to be business activity. Accordingly the gain/loss on account of share transactions are to be assessed under the head of capital gains. Accordingly, we set aside orders of authorities below, and decide the issue in favour of assessee. 4. Revenues appeals 4.1 One common issue raised pertains to treatment of amount received by assessee from sales and mutual fund units as long term capital gain as against its being taxable as business income. 4.2 Upon hearing of both the counsel and perusing the records. We find that we have already held under the assessee s appeal above that assessee cannot be held to be engaged into trading activity of shares and its transaction fall under the realm of capital gains/loss. Hence on the same reasoning, we do not find any infirmity in the order of Ld. CIT-A on this i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, a perusal of the assessment order reveals that the AO has not followed the guidelines of objective satisfaction as laid down by the Hon‟ble Bombay high Court in the case of Godrej Boyce (supra) while making the disallowance. He without recording any reasoning for his dissatisfaction with regard to the working/claim of the assessee, straightway applied Rule 8D against the mandate of the provisions of section 14A of the Income Tax Act. The Ld. CIT(A) also ignored the mandate of the provisions of section 14 A, while confirming the disallowance. So keeping in view of the overall facts and circumstances of the case, we restore this issue back to the file of the AO with a direction that the AO will give opportunity to the assessee to place on record all the relevant facts including its accounts and then examine the computation/calculation made in this regard by the assessee having regard to the accounts of the assessee. The AO will be at liberty to call for any record/evidences or statement etc. from the assessee as may be required by him for deciding the issue under consideration. After going through the details provided by the assessee, if the AO will be satisfie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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