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TMI Blog2021 (8) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... om transfer of such mutual funds, etc. would fall under the head Capital gains . On the question of taxability of interest on FDRs with nationalized banks, we hold that the same shall be taken as `Income from other sources and cannot be construed as income from business. We, therefore, accord our imprimatur to the finding given by the ld. CIT(A) in this regard. Allowing set off of loss against the income from transfer of capital gains - We hold that the assessee is entitled to set off the loss from mutual funds, etc. against the income from mutual funds, etc. However, this exercise requires examination of the amount of loss incurred from sale of mutual funds, etc. during the year and the amount of loss brought forward from earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO did not strike out the irrelevant limb. Respectfully following the Full Bench judgment of the Hon ble jurisdictional High Court, we affirm the order of ld. CIT(A) in rightly deleting the penalty levied by AO. - ITA No.709/PUN/2017, ITA Nos.1492 & 1493/PUN/2018 - - - Dated:- 13-5-2021 - Shri R.S. Syal, Vice President And Shri S.S.Viswanethra Ravi, Judicial Member For the Assessee : Shri Kishor Phadke For the Revenue : Shri Vitthal Bhosale ORDER PER R.S.SYAL, VP : These three appeals by the Revenue include two appeals against quantum assessments for the A.Ys. 2007-08 and 2008-09 and one appeal against penalty u/s.271(1)(c) of the Income-tax Act, 1961 (hereinafter also called `the Act ) for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligibility of deduction u/s 80P(2)(a)(i). In the fresh round of proceedings, the ld. CIT(A) noticed that the assessee was formed for the purpose of giving guarantee to deposits of members of Member Credit Co-operative Society after strategic decision taken by the Government of Maharashtra. Necessary approvals for this were required to be taken from IRDA and section 22 of the Banking Regulation Act provides that no company shall carry on a banking business in India unless it holds a license As the necessary approval was not granted, the assessee eventually could not commence its business for which it was set up. The amounts received from various stakeholders, which were temporarily invested in securities, resulted in the income under consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has also accepted the position. Now, the grievance of the Revenue is that in the absence of carrying on any business, the income earned from sale of mutual funds, etc. should have been taken as `Business income as held by the AO because the frequency of the transactions was very high rather than `Capital gains as held in the first appeal. We do not find much force in the contention of Revenue for the obvious reason that when the business itself was not allowed to be carried on to the assessee, the investment made in mutual funds, etc. cannot amount to fetching business income. Ex consequenti, the profit or loss from transfer of such mutual funds, etc. would fall under the head Capital gains . On the question of taxability of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... later year are mutatis mutandis similar. Following the view taken hereinabove for the A.Y. 2007-08, we hold that income from sale of mutual funds, etc. would fall under the head Capital gains , interest on FDs, etc. would fall under the head Income from other sources and the amount of loss for the year and brought forward loss from sale of mutual funds would be set off in terms of sections 70/71 and 74 of the Act. 7. In the result, these two appeals are partly allowed for statistical purposes. 8. The last appeal by the Revenue is against the deletion of the penalty imposed u/s 271(1)(c) of the Act in the first round of proceedings. It is seen that as against the Nil income declared by the assessee in its return of income for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay High Court in Mohd. Farhan A. Shaikh Vs. Dy.CIT (2021) 125 taxmann.com 253 (Bom) has considered this very issue. Answering the question in affirmative, the Full Bench held that a defect in notice of not striking the relevant words vitiates the penalty even though the AO had properly recorded the satisfaction for imposition of penalty in the order u/s 143(3) of the Act. In another judgment, the Hon ble Bombay High Court in Pr.CIT Vs. Golden Peace Hotels and Resorts (P.) Ltd. (2021) 124 taxmann.com 248 (Bom) also took similar view that where inapplicable portions were not struck off in the penalty notice, the penalty was vitiated. The SLP of the Department against this judgment has recently been dismissed by the Hon'ble Supreme Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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