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TMI Blog2018 (2) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009, the AO could not have disallowed the service charges paid to BTC. In the case of Bhgwandas Associates vs ITO (2007 (9) TMI 333 - ITAT PUNE-B) wherein it was held that when the AO in an order giving effect to the appellate order commits a mistake by travelling beyond the subject matter of the appeal before CIT(A) it gives rise to a mistake apparent on the face of the record which should be rectified u/s 154 of the Act. The aforesaid decision support the conclusion of CIT(A). Therefore we do not find merit in ground no.1 and 3 raised by the revenue. Disallowance u/s 14A - Held that:- This issue cannot be the subject matter of proceedings u/s 154 of the Act. The question whether the CIT(A) enhanced the disallowance u/s 14A of the Act without proper notice or any disallowance could at all be made u/s 14A of the Act cannot be subject matter of the order dated 15.06.2009 u/s 251 of the Act passed by the AO. If the assessee is aggrieved with the directions of CIT(A) he ought to have fled an appeal against such directions. Filing the application u/s 154 of the Act was not an appropriate remedy available to the assessee. The CIT(A) in our view erred in directing the AO to restri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is engaged in the business of making investments. The assessee filed return of income for A.Y.2005-06 showing a total income of ₹ 32,21,523/-. An order of assessment u/s 143(3) of the Income Tax Act, 1961 (Act) was passed by the AO on 20.12.2007. One of the issues that was considered by the AO in the assessment was as to whether the income declared by the assessee under the head Long Term Capital Gain and Short Term Capital Gain was to be regarded as income from business or income under head Capital gain . The AO held that income declared under the head Capital Gain has to be assessed under the head Income from business . The AO passed an order of assessment on 20.12.2007. While concluding the assessment the AO noticed that the assessee had paid a sum of ₹ 36,12,000/- as service charges to Bonanza Trading Co. Pvt. Ltd.(BTC) The AO was of the view that if ultimately the income declared under the head capital gain which was treated by him as income from capital gain then the assessee should not be allowed deduction of ₹ 36,12,000/- being Service Charges to BTC for rendering advice on investment, as Busines is held to be income under the head business expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 'capital gains'. As observed by the Hon'ble ITAT, Kolkata Bench in the case of Relianc-9 Trading Enterprises Ltd. (supra) the shares were purchased with an intention of earning dividend in addition to the prospect of making profit on sale of such investment in shares at an opportune moment without making any hurry for sale ignoring dividend. The transactions in the year under consideration on account of sale of shares under investment head is same in the preceding years and the same merits to be accepted as capital gains. Respectfully following the ratio laid down by the ITAT, Kolkata Bench in the case of Reliance Trading Enterprises Ltd. and the ratios laid down in the cases discussed, I hold the net surplus/profit on sale of shares/units shown under 'investment head' is to be treated' as capital gains as against business income assessed by the A.O. In the result. the appellant's ground on this issue is allowed. 5. It may be relevant to point out that with regard to the service charges paid to BTC the assessee had taken a specific stand before the CIT(A) as follows :- 5.2.15 In the last page of the Assessment Order, the Assessing Officer rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t In the balance sheet) Service charges paid to BTC (As per observation of the A.O. In his order that if the Income is held as investment income under the head Of Capital Gains, the assessee would not be allowable Huge expenses claimed especially service charges paid To BTC as business expenses, hence added). Rs.36,12,000/- Total income after adjustment Rs.69,48,882/- 8. Another issue which was considered by the AO in the order of assessment passed u/s 143(3) dt. 20.12.2007 was with regard to the disallowance u/s 14A of the Act. The AO disallowed 5% of the exempt income earned by the assessee which resulted in addition of ₹ 23,195/-. Against the aforesaid addition the assessee preferred appeal before the CIT(A) and CIT(A) in his order dated 31.03.2009 directed that the disallowance should be made in accordance with Rule 8D (2)(iii) of the Rules. In the order giving effect to the aforesaid directions of the CIT(A) passed by the AO on 15.06.2009 the AO made an addition u/s 14A of the Act of ₹ 1,15,380/-. We have already given the computation of total income made by the AO in the order pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14A of the Act the CIT(A) was of the view that in several decisions rendered by the Hon ble ITAT 1% of the exempt income alone should be disallowed u/s 14A of the Act with reference to the assessment years prior to A.Y.2008-09. The CIT(A) was of the view that the AO therefore ought to have restricted the disallowance u/s 14A of the Act to 1% of the exempt income. 12. Aggrieved by the aforesaid order of CIT(A), the revenue has preferred the present appeal before the tribunal. 13. We have heard the rival submissions. The ld. Counsel for the assessee reiterated the submissions as were made before the lower authorities. The ld. DR submitted that the issue sought to be raised in the application of the assessee u/s 154 of the Act before the AO were highly debatable and therefore outside the purview of the proceedings u/s 154 of the Act. According to him the AO was justified in rejecting the application u/s 154 of the Act. 14. We have given a very careful consideration to the rival submissions. As far as the service charges paid to BTC is concerned this was never the subject matter of addition in the original order of assessment passed by the AO u/s 143(3) of the Act dated 20.12 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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