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Income Tax Appellate Tribunal, MUMBAI BENCH “J”, MUMBAI
Before: SHRI R.C. SHARMA & SHRI SANJAY GARG
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 29.02.2012 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2008-09.
The assessee has taken two effective grounds of appeal. The first ground is in relation to the disallowance made by the lower authorities under section 14A of the Income Tax Act read with rule 8D of the Income Tax Rules on account of expenditure attributable to the earning of tax exempt income.
3. At the outset, the Ld. Counsel for the assessee has stated that the Ld. CIT(A) has confirmed the disallowance of Rs.23,41,906/- as computed as per the formula prescribed under rule 8D. However, the assessee itself had offered an amount of Rs.30,30,642/- as disallowance of expenditure under section 2 M/s. JBF Finance Limited 14A. The Ld. Counsel has stated that the disallowance that has been suo-moto offered by the assessee has not been reduced from the total disallowance made as per rule 8D. He, therefore, has submitted that double disallowance has been made by the lower authorities under section 14A read with rule 8D.
4. After considering the above submissions, we restore this issue to the file of the Assessing Officer (hereinafter referred to as the AO) to verify as to whether the disallowance of Rs.30,30,642/- suo-moto offered by the assessee has not been reduced from the disallowance calculated under rule 8D and if found so, the AO to reduce the same accordingly. This ground is therefore allowed for statistical purposes.
2. The second ground taken by the assessee is in relation to the treatment of income earned from transactions in shares and securities as business income by the lower authorities as against short term capital gains returned by the assessee. The Ld. A.R. of the assessee has stated that the assessee has consistently been treating the income from share transitions as investments and that there was no justification on the part of lower authorities in treating the income from share transactions as business income of the assessee.
The Ld. D.R., on the other hand, has stated that for the year under consideration the assessee used borrowed funds for the purpose of making the investments and therefore the facts of the year under consideration are different from the earlier assessment year.
We have considered the rival submissions. We find from the impugned order that the Ld. CIT(A) himself has made an observation that the assessee has shown income in the P & L account under two different heads; one as profit from dealing in shares and the second as profit on sale of investments. The Ld. CIT(A) has also observed that it is well settled principal that the assessee can have two different portfolios. The Ld. A.R. of the assessee has 3 M/s. JBF Finance Limited stated that the assessee has treated the income from sale and purchase of shares as capital gains in relation to the investment portfolio only. He has fairly agreed that the income earned in relation to trading portfolio is to be treated as business income of the assessee. The Ld. A.R. has further submitted that not only in the earlier assessment year but in the subsequent assessment year also, the income earned in relation to investment portfolio of the assessee has been accepted as capital gains by the Revenue Authorities. Under such circumstances, we do not find justification on the part of Revenue Authorities for shifting of stand for the year under consideration when the assessee had consistently been accepted as investor in relation to the investment portfolio, not only in the earlier assessment years but also in the subsequent assessment year. We, therefore, direct the AO to treat the income earned by the assessee in relation to investment portfolio as capital gains. This issue is accordingly allowed in favour of the assessee.
In the result, the appeal of the assessee is hereby treated as allowed.
Order pronounced in the open court on 06.05.2016.