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Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI DR. A.L. SAINI
Aforesaid appeal by the Revenue and cross objection by the assessee are against order dated 26th December 2016, passed by the learned Commissioner (Appeals)–36, Mumbai, for the assessment year 2012–13.
The ground raised by the Department is on the common issue as to whether the income / loss from share transaction should be assessed under the head “Capital Gain” or “Business Income”. While the Assessing Officer has treated the income / loss from share transaction as business income / loss, the learned Commissioner (Appeals) has accepted assessee’s claim of such income / loss to be treated as capital gain / loss.
Brief facts are, the assessee, an individual, filed its return of income for the impugned assessment year on 21st July 2012, declaring total income of ` 34,25,305. Subsequently, assessee filed a revised return of income on 23rd October 2013, declaring income of ` 35,54,820. During the assessment proceedings, the Assessing Officer while verifying the return of income and computation of total income
3 Smt. Mita Dipak Shah filed by the assessee found that income from sale of shares amounting to ` 1,04,51,578, has been offered as long term capital gain and simultaneously, claimed to be exempt under section 10(38) of the Income Tax Act, 1961 (for short “the Act”). Similarly, loss from sale of share amounting to ` 25,91,032, has been claimed as short term capital loss. The Assessing Officer after calling for details of share transaction and income derived therefrom by the assessee found that the assessee has offered income of ` 37,255, from share trading as business income. After verifying the details of share transaction, the Assessing Officer observed that looking at the large volume, frequency, continuity and regularity of transactions relating to purchase and sale of shares it has to be held that the income derived therefrom is business income. Further, the Assessing Officer referred to the assessment order passed for assessment year 2010–11 in assessee’s own case, wherein, similar income derived by the assessee was assessed as business income. Accordingly, he concluded that the gain / loss derived from sale of shares have to be assessed under the head “Income from Business or Profession”. Accordingly, he passed the assessment order. Being aggrieved with such decision of the Assessing Officer assessee preferred appeal before the first appellate authority.
4 Smt. Mita Dipak Shah 4. The learned Commissioner (Appeals) taking note of the fact that while deciding identical dispute in assessment year 2010–11, the assessee’s claim was accepted by the first appellate authority, followed the same and allowed assessee’s claim of capital gain / loss.
The learned Departmental Representative relied upon the observations of the Assessing Officer and the grounds raised.
The learned Authorised Representative submitted, while deciding identical issue arising in assessee’s own case for assessment year 2010–11, the Tribunal has upheld the decision of the learned Commissioner (Appeals) in accepting assessee’s claim of gain / loss from sale of shares to be treated as long term capital gain and short term capital loss. In this context, he drew our attention to the order passed by the Tribunal, Mumbai Bench, in ITA no.3988/Mum./2016 and C.O. no.51/Mum./2018, dated 15th May 2018.
We have considered rival submissions and perused materials on record. As could be seen from the facts on record as well as order of the Departmental Authorities, identical dispute was also involved in assessee’s own case for assessment year 2010–11. When the disputed issue reached the Tribunal, it was found that the assessee is maintaining two portfolios i.e., investment as well as trading and the assessee has duly classified the shares into investment and trading
5 Smt. Mita Dipak Shah segment. It was also found that the assessee had used her own fund for investment activity. Thus, after considering the aforesaid fact the Tribunal accepted assessee’s claim with the following findings:– “7. We have heard the rival submissions of both the parties and perused the material on record including the impugned order. The undisputed facts are that the assessee is maintaining two portfolios i.e., investment as well as trading. In the investment portfolio the shares are held as investments whereas in the trading portfolio the shares and securities are held as stock in trade. The assessee has duly classified the same in the shares into investment portfolio and trading segment. We also note that the assessee has used her own funds and no funds were used for the purpose of investments. Therefore, looking to the facts and circumstances of the case in totality, we do not find any defect or infirmity in the order of Ld. CIT(A). Moreover, the case of the assessee is squarely covered by the decision of the co–ordinate bench of the Tribunal in for A.Y. 2010–11 and others. The relevant paras of the said order are reproduced as under:– “18. To sum up, we find the view of the AO in treating the LTCG and STCG as business income of the assessee, is not proper. Considering statutory provisions regarding the definition of LTCG we are convinced that the views of CIT(A) are sustainable. Similarly, regarding the claim of STCG also we find that (i) the consistency principles; (ii) use of own funds of ` 54 Crs; (iii) earning of gross dividend income of ` 1.20 crs or ` 30 lakhs on account of short term capital assets; (iv) details given in the contract notes regarding intention of certain shares in physical form etc., suggest that the STCG in que4stion cannot be held as business income.
19. Therefore, in our opinion, the decision of the CIT(A) on this issue is fair and reasonable and does not call for any interference. Accordingly, grounds raised
by Revenue with regard to both the STCG and LTCG are dismissed.
20. In the result, appeal of the Revenue is dismissed.”
8. After perusing the above order of the co–ordinate bench of the Tribunal vis–a–vis facts of the assessee’s case, we find that the facts in the said case are same as involved in the present case before us. Therefore, following the above order of the Tribunal,
6 Smt. Mita Dipak Shah we affirm the order of Ld. CIT(A) by dismissing the appeal of the revenue.”
There being no difference in facts brought to our notice by the learned Departmental Representative in the impugned assessment year, respectfully following the aforesaid decision of the Co–ordinate Bench in assessee’s own case, we uphold the decision of the learned Commissioner (Appeals) on the issue by dismissing the ground raised.
In the result, Revenue’s appeal is dismissed.
C.O no.137/Mum./2018 – By Assessee
In grounds no.1 and 2, the assessee has challenged disallowance of ` 3,30,071 under section 14A r/w rule 8D(iii).
Brief facts are, during the assessment proceedings, the Assessing Officer noticing that in the relevant previous year the assessee has earned dividend income of ` 37,02,977, which has been claimed as exempt under section 10(34) of the Act, whereas, the assessee has not disallowed any expenditure attributable to such exempt income, called upon the assessee to explain why disallowance of expenditure in terms of section 14A r/w rule 8D for earning exempt income should not be made. Though, the assessee objected to the proposed disallowance, however, the Assessing Officer rejecting the objections of the assessee disallowed administrative expenditure of ` 3,30,071
7 Smt. Mita Dipak Shah under section 14A r/w rule 8D(2)(iii). The assessee challenged the aforesaid disallowance before the first appellate authority.
The learned Commissioner (Appeals), however, upheld the disallowance made by the Assessing Officer.
The learned Authorised Representative submitted that assessee has not claimed any expenditure at all while computing its income. Therefore, in absence of any expenditure claimed by the assessee notional disallowance under section 14A r/w rule 8D cannot be made. In support of such contention, he relied upon the following decisions:–
i) Gillette Group India Pvt. Ltd. v/s ACIT, [2010] 16 ITR 057; ii) DCIT v/s M/s. Trade Apartment Ltd., ITA no.1277/Kol./ 2011 dated 30th March 2012; and iii) ACIT v/s Iqbal M. Chagala, ITA no.877/Mum./2013, dated 30th July 2014.
The learned Departmental Representative relying upon the observation of the learned Commissioner (Appeals) and the Assessing Officer submitted that when the assessee has earned exempt income, disallowance under section 14A r/w rule 8D has to be made.
We have considered rival submissions and perused materials on record. As could be seen from the revised computation of income filed by the assessee along with the revised return of income, a copy of 8 Smt. Mita Dipak Shah which is at Page–12 of the paper book and the Income and Expenditure Account for assessment year 2012–13, the assessee has offered the gross income earned by her to tax without claiming any expenditure whatsoever. Thus, it is a fact on record that the assessee has not claimed any expenditure at all. Therefore, when the assessee has not claimed any expenditure, there is no question of making disallowance under section 14A r/w rule 8D on notional basis. The decisions relied upon by the learned Authorised Representative clearly support this view. In fact, while deciding similar issue arising in assessee’s own case for assessment year 2010–11, the Tribunal accepted assessee’s claim that disallowance under section 14A r/w rule 8D(iii) cannot exceed the actual expenses claimed by the assessee. Since, in the impugned assessment year the assessee has not claimed any expenditure at all, logically there cannot be any disallowance under section 14A r/w rule 8D(2)(iii). Accordingly, we delete the disallowance of ` 3,30,071.
In ground no.3 the assessee has challenged levy of interest under section 234C of the Act.
It is the contention of the learned Authorised Representative that interest under section 234C of the Act can be charged on the basis of returned income and not assessed income. For such proposition, he has relied upon the following decisions:–
9 Smt. Mita Dipak Shah i) Bombay Gymkhana Ltd. v/s ITO, [2008], 115 TTJ 639 (Mum.); ii) Wipro Information Technology Ltd. v/s DCIT, [2004] 88 TTJ 778 (Bang.); iii) Mrs. Prabhalal v/s CIT, 269 ITR 212 (Pat.).
The learned Departmental Representative relied upon the observations of the learned Commissioner (Appeals) and the Assessing Officer.
Having considered rival submissions and perused materials on record, we find merit in the submissions of the learned Authorised Representative. A reading of the provisions contained under section 234C of the Act makes it clear that the interest under the said provision has to be charged on the returned income. That being the case, we delete the interest charged under section 234C of the Act.
In the result, assessee’s cross objection is allowed.
To sum up, Revenue’s appeal is dismissed and assessee’s cross objection is allowed. Order pronounced in the open Court on 28.06.2018