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TMI Blog2016 (2) TMI 1268X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the action of assessing officer in assessing the short term capital gains of Rs. 32,35,4527- as "Business Income" without appreciating that assessee was not trader in shares. 2.1 Without prejudice, the CIT(A) erred on facts and in law in not appreciating that short term capital gains under Portfolio Manager (PMS) could not in any circumstance be said to be business income." 3. Brief facts of the case is that the assessee company was established with a main object of design engineering and consultancy organization with specific strengths in oil and gas (onshore and offshore), petroleum refineries, chemicals, petro chemicals and pipelines. 4. Ground Nos.1 and 1.1 of the appeal are against the disallowance u/s 14A of the Act of Rs. 31,28,928/-. During the course of assessment proceedings, it was found by the AO that the assessee has made certain investment in shares, mutual funds, bonds etc. out of fund borrowed either by the assessee or from its own source. Since the income arising out of this investment in the form of dividend and long-term capital gain etc. is exempt and therefore provision of section 14A of the act wasinvoked by the AO. After invoking the provisions he comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 252/-. Regarding the investment in subsidiary he submitted that these are the strategic investment in the company for this he placed reliance on the decision of ITAT in GE Capital Service India and others Vs. ACIT, Interglobe Enterprise Ltd. Vs. DCIT. In the end he submitted that disallowance made on its own of Rs. 13,43,545/- is appropriate. 6. Against this, the LD DR relied on the order of the learned Commissioner of Income tax (Appeals) and AO and submitted that disallowance has been rightly worked out. 7. We have carefully considered rival contention as well as the written synopsis placed before us. a. It is apparent on reading of order thatRule 8D has been applied by the AO without placing any satisfaction in assessment order that the computation made by the assessee of disallowance u/s 14A is not appropriate. Without looking into the disallowance made by the assessee Rs. 13,43,545/- , ld. AO has straight way issued the show cause notice dated 02.11.2010 to the assessee as to why the provision of Rule 8D should not be applied for working deduction of disallowance u/s 14A of the Act. According to the provision of Section 14A the AO is required to record his satisfaction tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held as under :- "16. What is also noticeable is that the entire or whole expenditure has been disallowed as if there was no expenditure incurred by the respondent-assessee for conducting business. The CIT(A) has positively held that the business was set up and had commenced. The said finding is accepted. The respondent-assessee, therefore, had to incur expenditure for the business in the form of investment in shares of cement companies and to further expand and consolidate their business. Expenditure had to be also incurred to protect the investment made. The genuineness of the said expenditure and the fact that it was incurred for business activities was not doubted by the Assessing Officer and has also not been doubted by the CIT(A). " Similarly, in this appeal of assessee also out of indirect expenditure of Rs. 3514664/- disallowance is made of Rs. 3018766/- which is incomprehensible. 8. Based on the above facts and circumstances we reverse the order of the learned Commissioner of Income-tax (Appeals) confirming the disallowance to the extent of Rs. 31,28,928/-. However, as assessee himself has disallowed an amount Rs. 13,43,545/- we direct accordinglyto restrict the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or more than 100 days except in few cases. Further, in thecase of mutual fund he submitted that short term capital gain of such mutual fund is also held for more than 100 days except one or two transaction. He further stated that there are hardly 5 to 7 mutual fund in which the investment is madeand regardingshares, he submitted that number of scripts transacted are 10 to 15. He further submitted that Hon'ble Delhi High Court in the case of Yamaha Ltd. Vs. ACIT ITA No.658/2010 dated 04th April 2014 as held that surplus from the sale of the mutual fund had to be treated as income chargeable to tax as capital gain and not as business income. He further relied up on the decision of Honourable Delhi high court in case of Radials International V ACIT Limited ITA No.485/2012 dated 25.4.2014. He further submitted that sale of equity shares under the portfolio management scheme are also chargeable to tax under the head capital gain only and not as business income. 12. Against this ld., DR vehemently supported the order of the learned Commissioner of Income tax (Appeals) as well the order of the AO. 13. We have carefully considered the rival contention. From the details of investment of s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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