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आयकर अ�ध�नयम, 1961 क� धारा 254(1) के अ�तग�त आदेश Order u/s.254(1)of the Income-tax Act,1961(Act) Per Pawan Singh, J.M. �या�यक सद�य iou iou iou �संह के अनुसार: iou 1. This appeal by assessee u/s 253 of the Income Tax Act (the Act) is directed against the order of ld. CIT(A)-4, Mumbai dated 13.01.2015 for Assessment Years (AYs) 2010- 11.The assessee has raised the following grounds of appeal:
1. The Learned CIT(A) erred in facts and circumstances and in law in confirming the action of AO holding ST Capital Gains as business income overlooking consistent treatment of the appellant of the gains made on investments.
2. The Learned CIT(A) erred in facts and circumstances of the case and in law in confirming disallowance made by AO Under Section 14A of The Income Tax Act 1961
3. The Learned CIT(A) erred in facts and circumstances of the case and in law in not adjudicating ground seeking rebate U/s 88E in the event STCG declared by the appellant is held as business income.
2. Brief facts of the case are that the assessee filed its return of income for relevant AY on 04.10.2010 declaring total income at Rs. 98,82,190/-. The assessment was completed u/s 143(3) of the Act on 24.02.2014. The Assessing Officer (AO) while passing the assessment order besides the other addition and disallowance treated the Short Term Capital Gain (STCG) of Rs. 99,15,619/- and Long Term Capital Gain (LTCG) of Rs. 40,781/- as Business Income. The AO further disallowed a sum of Rs. 6,41,507/- u/s 14A of the Act. On appal before the ld. CIT(A), the action of AO was confirmed, thus, further aggrieved by the order of AO, the assessee filed the present appeal before us.
3. We have heard the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue and perused the material available on 2 M/s Amol Financial Services P. Ltd. record. The Ld.AR of the assessee argued that during the year under consideration, the assessee dealt with in 14 securities. Out of 14 securities, the assessee earned 97% of its gain from two securities i.e. Jain Irrigation and REC LTD. and in rest of the state, there was a Short Term Capital Loss (STCL). The ld. AR of the assessee further argued that in earlier years the similar income was accepted by AO as a STCG in the order passed u/s 143(3) of the Act. The Ld. AR of the assessee in support of his submission relied upon the decision of Co-ordinate Bench in Paresh D. Shah vs. JCIT in ITA No. 6602/Mum/2009 dated 20.08.2010. On the other hand, ld. DR for the Revenue supported the order of authorities below.
4. We have considered the rival contention of the parties and perused the order of authorities below. During the assessment proceeding, the AO observed that assessee disclosed STCG of Rs. 99,15,619/-. Out of the total available capital of Rs. 2.06 Crore, the assessee invested Rs. 1.48 Crore in share and securities. The assessee had dealt with 14 securities. After considering the period of holding, frequency of transaction, quantum of turnover, the AO concluded that the assessee is indulge in trading of share and the profit derived from such trading including sale of LTCG and STCG was treated as “Business Income”. On appeal before the ld. CIT(A), the action of AO was confirmed, the ld. CIT(A) also concluded that assessee is involved in the trading of share and not investor and the transaction are clearly in the nature of business transaction. We have seen that the assessee has filed the breakup of STCG for relevant AY. The assessee has transacted in the following scripts: AMOL FINANCIAL SERVICES PVT. LTD. BREAK UP OF STCG FOR A Y 2010-11 SR NAME OP BAL 0-30 30-60 60-90 90-120 120-150 150-180 >180 Total N O 1 AIA ENG 183610 0 0 0 0 0 0 0 183610 2 DISHAMAN 35929 0 0 0 0 0 0 0 35929 3 JAIN 6353664 -231576 1375027 197509 939923 267771 8902318 IRRIGATIO N 4 NHPC 0 410 303 2060 13375 0 0 0 16148 5 PIR GLASS 36621 0 0 0 0 0 168160 759 205540 6 PNB GILTS 0 -2160 -16751 -12157 40979 0 0 0 -72047 7 POCHIRAJU 0 240 -30869 184 0 0 0 0 -30445 8 RAMA PUL 0 0 -5772 0 0 0 0 0 -5772 9 RECLTD 984893 0 0 0 0 0 0 0 984893 10 RENUKA 0 -39813 0 0 0 0 0 0 -39813 12 VIMTALAB 0 4860 -19835 0 0 0 0 0 -14975 S 13 VOLTAS 0 0 0 6743 0 0 0 0 6743 14 WELSPUNI 0 0 -233 0 0 0 0 0 -233 ND 15 WINDSOR 0 0 186 0 0 0 0 0 0186
7594716.74 -268039.00 1302056.25 -3170.00 169905.42 939922.76 435931.17 759.00 10172082.34
DEMAT (256,465) CHGS TAXABLE STCG 9,915,617 OF 15 SCRIPTS ON THREE NO NEW PURCHSAE HAS BEN MADE AT ALL DURING THE YEAR
The perusal of above table reveals that assessee earned STCG of Rs. 89.02 Lakhs on Jain Irrigation and Rs. 9.84 Lakhs from REC LTD., which consist of total about 97% of STCG. We have further noticed that out of the claim Rs. 99 Lakhs , the assessee has opening balance of Rs. 73.39 Lakh is out of opening balance of STCG. The assessee transacted only in 15 scripts. The Ld DR not disputed the that in earlier year the similar income was accepted as STCG. The Co-ordinate Bench in Paresh D. Shah (supra) while considering the similar issue held as under: 5. We have also noted that it is an admitted position - both by the Assessing Officer as also by the CIT(A) - that the material facts of the present assessment year are the same as of the immediately preceding assessment year which has been decided in favour of the assessee by the coordinate bench. As a matter of fact, the shares sold in the current year are carried forward from the earlier year, and, vide Tribunal's order for the said year, these shares were held as investments. In this view of the matter, the sale of these shares cannot give rise to an income taxable under the head 'profit and gains from business and profession'; the said income can only be taxed as 'capital gains'. In view of these discussions, and bearing in mind entirety of the case, we deem it fit and proper to direct the Assessing Officer to tax the income on sale of shares as capital gains. We direct so.
Considering the decision of coordinate bench, when the share sold in the current year was carried forward and the substantial gain was earned by the assessee only from sale of two scripts. And for earlier years the Revenue has accepted the STCG on similar transaction, in our considered opinion, the income earned by assessee can only be taxed as “Capital Gain”. Hence, the ground no.1 raised by assessee is allowed.
Ground No.2 relates to disallowance u/s 14A of the Act. The Ld. AR of the assessee argued that no interest disallowance was required rather the assessee has earned interest income which were shown in the P&L A/c at Rs. 7,66,288/- and the assessee has only paid 4 M/s Amol Financial Services P. Ltd. interest of Rs. 3,55,692/-. The ld. AR of the assessee argued that during the year under consideration, the assessee earned the exempt income of Rs. 1,10,518/-. The assessee has not made any voluntary disallowance as the assessee has not made any expanses for earning such income. The assessee has owned sufficient interest free funds available with it. The ld AR submitted that the disallowance may be restricted to the exempt income. The ld AR for assessee in support of his submission the ld AR for assessee relied upon the decision of M/s Vahanvati Consultants P. Ltd. vs. DCIT in ITA No. 8700/Mum/2011 and on Sanghvi Apporva Lalubhai (HUF) Vs. ACIT in ITA No. 7767/Mum/2014. On the other hand the ld DR for the revenue supported the order of the authorities below.
We have considered rival contention of the parties and gone through the order of authorities below. During the assessment the AO observed that the assessee earned the exempt income of Rs. 1,10,518/-. The assessee has not made any voluntary disallowance. The AO asked the assessee as to why the disallowance u/s 14A r.w. Rule 8D should not be made. The assessee contended that no expenses were incurred by the assessee to earn the exempt income. The contention of the assessee was not accepted and the AO invoke the provisions of Rule 8D and made the disallowance of Rs. 6,41,507/-. On appeal before the ld. CIT(A), the similar contention was raised. The ld. CIT(A) concluded that assessee could not establish the nexus between the capital invested in securities and the borrowed loan. All the funds were hotchpotch and confirmed the disallowance. Considering the peculiarity of the fact that the assessee earned only a sum of Rs. 1,10,518/- as exempt income. The assessee has sufficient funds and earned interest income of Rs. 3,55,692/-. Thus, we respectfully following the decision of coordinate bench in Vahanvati Consultants P. Ltd. vs. DCIT (supra), restrict the disallowance u/s 14A to Rs. 1,10,518/-. We order accordingly.
In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on 10th February 2017. आदेश क� घोषणा खुले �यायालय म� �दनांक10 Qjवर�, 2017 को क� गई । Sd/- Sd/- (राजे�� / RAJENDRA (iou iou iou �संह / PAWAN SINGH)) iou लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य / JUDICIAL MEMBER मुंबई/Mumbai,�दनांक/Date: 10.02.2017 SK