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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri P.M. Jagtap & Shri A. T. Varkey, JM]
ORDER
Per Shri A.T.Varkey, JM
1. This is an appeal preferred by the revenue against the order of Ld. CIT(A)-11, Kolkata dated 07.07.2017 for AY 2010-01.
The first ground of appeal
of revenue is against the action of Ld. CIT(A) in restricting the disallowance made by the AO invoking section 14A of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) read with Rule 8D of the Income-tax Rules, 1962 (hereinafter referred to as the “Rules”).
3. Brief facts of the case are that the AO noted that the assessee had earned dividend income of Rs.39,40,246/- which was claimed as exempt. The AO noted that the assessee has suo motu only disallowed a sum of Rs.2,56,237/- and claimed that it has not incurred any expenditure for earning dividend. However, the AO did not agree with the contention of the assessee and he was of the opinion that Rule 8D of the Rules has to be applied and thereafter he made disallowance @ 0.5% of the average value of investment at Rs.13,37,387/-. However, the AO restricted the disallowance to the extent of administrative expenses debited to the P&L Account at Rs.6,75,682/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to restrict the disallowance at Rs.3,19,918/-. Aggrieved, the revenue is before us.
M/s. Chartered Finance & Leasing Ltd., AY- 2010-11 4. We have heard rival submissions and carefully gone through the facts and circumstances of the case. The facts noted by the AO are not repeated for the sake of brevity. We note that the AO has not made any disallowance on the interest component under Rule 8D(2)(ii) since there was no payment of interest and the assessee has made the investment out of its self funds. We note that the AO had restricted the disallowance to the extent of administrative expenses debited to the P&L Account which is erroneous. It is a common knowledge that administrative expenses are also for running of the day-to-day activities of the company and cannot be only for earning the exempt income, which is only a part of the activity of the assessee company and we note that the Ld. CIT(A) has taken note of the break-up of administrative expenses given at page 3 of Ld. CIT(A)’s order viz. legal and professional expenses and auditor fees, travelling expenses etc., therefore, we find the order of the Ld. CIT(A) in restricting the disallowance to Rs.3,19,918/- in place of the AO’s order of disallowance of Rs.6,75,682/- to be reasonable in the facts and circumstances of the case and, therefore, we refrain from interfering with the order of the Ld. CIT(A) and dismiss this ground of appeal of the revenue.
5. Ground no. 2 of the revenue is against the action of the Ld. CIT(A) in rejecting the treatment by the AO of income of Rs.1,98,24,199/- as business income instead of capital gain as claimed by the assessee.
Brief facts of the case are that the AO noted from a perusal of the computation of income that assessee had shown short term capital gain arising out buying and selling of shares to the tune of Rs.1,98,24,199/-. So, the AO asked the assessee to furnish the details of the purchase and sale of shares which resulted in the gain. Pursuant to the query, the assessee furnished statement showing details of purchase and sales of shares. After the examination of the details, according to AO, since the shares were held for a short period and considering the volume, frequency and regularity suggested the transactions were in the nature of business. Even though the assessee brought to the notice of the AO that the assessee has all along in the past treated it as investment in shares as capital asset and the profit/loss on sale of such shares were treated under the head capital gains and in the previous assessment years the above position was consistently accepted by the Department.
M/s. Chartered Finance & Leasing Ltd., AY- 2010-11 It was brought to the notice of the AO that these shares were never held as stock in trade and the investments were always valued at cost and that the assessee did make payment of STT and did not claim any rebate u/s. 88E of the Act because the assessee is not a trader and that the assessee had used only its own capital and reserve funds to acquire the shares and has earned reasonable dividend on such investment. These contentions of the assessee were not accepted by the AO and he held that the entire gain as business income and so according to him, this amount is liable to be taxed @ 30%. Aggrieved, assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the addition and allowed the claim of the assessee that the said gain is the short term capital gain of the assessee. Aggrieved, the revenue is before us.
We have heard rival submissions and gone through the facts and circumstances of the case. The facts narrated above are not repeated for the sake of brevity. On appeal, we note that the Ld. CIT(A) took note of the fact that the assessee was investing in shares as an investor only and this fact has been consistently upheld by the AO during scrutiny assessments carried out in AYs 2005-06 and 2006-07 and thereafter in AYs 2012-13, 2013- 14 and 2014-15. Therefore, according to Ld. CIT(A), when the rule of consistency as applied, the assessee’s claim of short term capital gain should have been accepted and there was no necessity to depart from the earlier consistent stand taken by the AO during scrutiny proceedings for the earlier assessment years cited above; And the Ld. CIT(A) observed that the CBDT vide Circular No. 6/2016 dated 29.02.2016 has been categorically made it clear that in respect of listed shares and securities held for a period of more than 12 months immediately preceding the date of its transfer, if the assessee desires to treat the income arising from the transfer thereof as capital gain, the same shall not be put to dispute by the AO. However, this stand once taken by the assessee in a particular assessment year, shall remain applicable in subsequent assessment years also and the tax payers shall not be allowed to adopt a different/contrary stand in this regard in subsequent years. We note that the assessee’s consistent stand was that of an investor in shares and so, when the share shown as investment was sold it is booked as the gain or loss as capital gain/loss. We note that for this year the assessee has dealt with only two shares viz., Graphite India Ltd. and Strides Arcolab Ltd. Graphite India Ltd.’s share was acquired by a scheme of de-merger of M/s. Chartered Finance & Leasing Ltd., AY- 2010-11 M/s. GKW Ltd. approved by Hon’ble High Court, which facts have been mentioned in the investment schedule before 31.03.2007; and Strides Arcolab Ltd. shares have been acquired during FY 2008-09. So in the light of the aforesaid facts, and taking note that the department has accepted the stand of the assessee as an investor in the earlier assessment years, applying the Rule of Consistency also we do not find any merit in the appeal of the revenue, so we are not inclined to interfere with the order of the Ld. CIT(A) and dismiss the appeal of the revenue.
In the result, appeal of revenue is dismissed. Order is pronounced in the open court on 3rd April, 2019 Sd/- Sd/- (P. M. Jagtap) (Aby. T. Varkey) Vice President Judicial Member
Dated : 3rd April, 2019 Jd.(Sr.P.S.) Copy of the order forwarded to:
Appellant – DCIT, Circle-1(1), Kolkata.
2 Respondent – M/s. Chartered Finance & Leasing Ltd., 2B, Grant Lane, 2nd floor, Room No. 74, Kolkata-700 012. 3. CIT(A)-11, Kolkata (sent through e-mail) CIT- , Kolkata. 4.
DR, ITAT, Kolkata. (sent through e-mail)