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TMI Blog2023 (10) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in ITA Nos. 93, 226 & 227 of 2012 in assessee's own case for AY 2007-08 wherein the Hon'ble High Court has held that income of the assessee from sale of shares/securities/mutual funds by the assessee is chargeable to tax as Business Income as sole activity of the assessee was to invest in shares/securities/mutual funds as regular course of business and to earn profits from such investment. 1.b) Whether the Ld CIT(A) has failed to appreciate that the issue involved in the instant year has been adjudicated in favor of Revenue by the Hon'ble High Court in ITA No. 226 of 2012 in assessee's own case and the said judgment has a binding effect on the appellate authorities below. 1.c) Whether the Ld CIT(A) has erred in relying on CBDT circular 6 of 2016 (dated 29.02.2016) in accepting the contention of the assessee that the income of the assessee is chargeable to tax under the Head "Capital Gains", not appreciating the fact that: i) The Circular is meant to apply to situations where the assessee is holding dual portfolio i.e. shares held investment and shares held-as-stock in trade, and not to a situation where the sole business activity is investment in sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Funds (Dividend Plan) as business income but in the present case from the submissions of assessee noted by the Ld.CIT(A) in para 6.1 reveals that the impugned income was accrued to the assessee out of sale of investment in shares, which the assessee was holding for a period of thousand days i.e. maximum upto 3301 days. 3.1 Therefore, the Ld. Counsel submitted that the facts in the Judgment of Hon'ble High Court of Punjab & Haryana (supra) are distinct and dissimilar to the facts of the present case, therefore, the same cannot be applied to the present case blindly. He submitted that the Ld.CIT(A) has granted relief to the assessee after considering the entire factual position emerging from Balance Sheet of assessee and CBDT Circular No.6 dated 29.02.2016. Therefore, first appellate order was kindly be uphold dismissing the appeal of Revenue. 4. On careful consideration of submissions from the judgment of Hon'ble Punjab & Haryana High Court in three appeals (supra) including ITA No.226/2012 pertaining to present assessee the identical issue under identical circumstances has been decided in favour of the Revenue and against the assessee with following observations and findings: - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment year 2005-06 to the tune of Rs. 2,49,934/-, had been allowed by him. 28. So far as ITA Nos.226 and 227 of 2012 are concerned, unlike case of ITA No.39 of 2012, activities of the assessee in these appeals are so frequent and regular in their operation and in the usual course of business activity of the assessees that no case for treating the impugned income as resulting from transactions labelled as 'tenurial investments', is made out." 5. From para 6.1 of first appellate order we note that before Ld.CIT(A) the assessee submitted detailed factual explanation and submissions on 18.05.2015, 25.02.2015 and 02.09.2015, which are as follows: - "6.1 In support of grounds No. 2 and 2(b) of appeal, the assessee company through its learned AR has filed written submissions vide letters dated 18.05.2015, 25.08.2015 and 02.09.2015, the relevant paras of which read as under:- Written submissions dated 18.05.2015 Ground No. 1 - That the Ld. Assistant Commissioner of Income Tax. Circle V has wrongly computed and assessed total income at Rs. 9,62,94,015/- against the returned income at Rs. 5,62,94,011/-. 1. The assessee company is a regular income tax assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. These investments has always been shown as investment and valued at cost as per AS-13. 9. Prior to AY 2006-07, it has always been accepted as investment. 10. The Hon'ble High Court in the earlier years has treated the profit on sale of mutual fund as 'Business Income'. 11. The issue before the Hon'ble High Court in AY 2006- 07 in assessee's own case is as under: "Whether on the facts and in law, the Hon'ble ITAT was legally justified in upholding the decision of CIT(A)-II, Ludhiana and in holding that the income on sale of Tata Mutual Funds (dividend plan) are assessable as income from Short Term Capital Gain inter-alia on the ground that the units of mutual funds are not tradable and that therefore the assessee had made investment in non tradable commodity." 12. The Hon'ble Supreme Court has repeatedly held that a finding of facts given by the Hon'ble ITAT can be interfered by the Hon'ble High Court in appeal u/s 260A of I.T. Act, 1961, only if, firstly, a specific question of law is raised, attacking the finding of the Tribunal on the ground of perversity and secondly establishing the existence of such perversity. Reference by made in the case of Ravindranathan Nair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Hon'ble ITAT Chandigarh Bench in the case of ACIT Vs. Gaurav Munjal in ITA No.740/2012 dated 31.10.2012 for AY 2008-09 where a disallowance of Rs. 5000/- was restricted out of total expenditure of Rs. 1279001/- i.e. 0.03%. Ground No.3 That the Ld.ACIT has wrongly calculated and determined the disallowance u/s 14A at Rs. 95,26,10,119/-. 1. The Ld. AO has calculated and determined the disallowance of Rs. 952610119/- u/s 14A by applying Rule 8D in case the income of assessee is continuing to be treated under the head "Capital Gains", no disallowance u/s 14A is called for, as the assessee has not claimed any expenditure in the return. 2. However in case the profit on sale of investment is treated as "Business Income" and the expenditure of Rs. 782520175/- debited in the P&L Account is allowed. It is prayed that the disallowance u/s 14A may be calculated proportionately, since the investments held by the assessee would yield both exempt and non exempt income. 3. Moreover other than the finance cost of Rs. 75.86 crores, the other expenses have not been incurred directly in relation to the investment income and accordingly, should not be disallowed. Written submissions dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as has been met directly or indirectly be any other person or authority." Since in this case, no portion of actual cost of shares has been met directly or indirectly by any other person or authority, therefore, the provisions made for diminution in value of shares will not be reduced from the "actual cost" for the purpose of determination of business profit as mentioned in section 43 of Income Tax Act. A chart showing the calculation of profit/loss on sale of shares without considering the diminution in value of shares for computing the income under the head "Business Income" is enclosed. It is, therefore, prayed that the loss on sale of shares without reducing the diminution in value is as per chart enclosed herewith, may be allowed." 6. From the relevant operative part of first appellate order we further note that the Ld.CIT(A) has granted relief to the assessee with following observations and findings: "6.2 The written submissions filed by the assessee company through its learned AR vide letter dated 18.05.2015 were forwarded to the Assessing Officer for his comments/report. However, the Assessing Officer has not submitted the report till date. As the issue is same as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The alternative ground taken by the assessee is rejected as the same has become infructuous in view of the fact that the income from sale and purchase of shares/mutual funds/PMS etc. has been directed to be treated as long/short term capital gains. 7. As the income from the purchase and sale of shares/securities has been directed to be treated as income under the head 'capital gains', the ground 3 of appeal taken by the assessee company have become infructuous. Accordingly, the ground No. 3 of appeal taken by the assessee company is dismissed. 8. The ground No. 4 of appeal taken by the assessee company is general in nature and do not require any adjudication separately. 9. As a result, the appeal filed by the assessee company is partly allowed." 7. On careful consideration of above noted rival submissions, basis taken by the AO for treating income from sale of shares as business income and reasoning arrived by the Ld.CIT(A) for treating the impugned income as "capital gains" along with paras 26 to 28 of Judgment of Hon'ble High Court of Punjab & Haryana, fir of all, we note that in the case before Hon'ble High Court the issue was pertaining to treatment of income on sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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