2017 (1) TMI 1637 - AT - Income Tax

Tribunal Partially Allows Appeal, Remands Issues for Reconsideration

The Tribunal partially allowed the appeal, remanding certain issues back to the CIT (A) for reconsideration in light of relevant directives and legal ... Nature of loss - trading loss on the units of Principal Index Mutual Fund (PIF) - Short Term Capital Loss or business loss - Held that:- The assessee fairly submitted that this issue needs to revisit the file of the CIT (A) for the reason of following and complying with the contents of CBDT Circular 6/2016, dated 29.2.2016. After hearing both the parties, we find merit in the Ld AR's argument and remand this issue to the file of the CIT (A) for applying the contents of para 3(a) of the said Circular (supra) TDS u/s 194A - non deduction of tds on interest payments - Held that:- Both the parties explained the facts and submitted that the Board Circular No.6/2016, dated 17.06.2016 was not appreciated by the CIT (A). It was fairly submitted that the said Circular was issued recently before the finalization or adjudication of the issues by the CIT (A). Ld AR also brought our attention to the decisions of the Tribunal in the assessee's own case for the AY 2010-2011 and AY 2008-2009 and submitted that these orders of the Tribunal were also not available to the CIT (A) at the relevant point of time. Considering the subsequent development, we find, the issue raised in ground no.2, in principle, is allowed. However, for examining the facts of the case, we remand this issue to the file of the CIT (A) to decide the issue afresh after affording a reasonable opportunity of being heard to the assessee Disallowance u/s 14A read with Rule 8D(2)(iii) - Held that:- It is a settled legal proposition at our level that the average investment desires exclusion of the non-dividend yielding investments in view of ACB India Limited vs. DCIT [2015 (4) TMI 224 - DELHI HIGH COURT] and Coal India Limited [2015 (5) TMI 843 - ITAT KOLKATA]. Therefore, in our opinion, the assessee is entitled to relief on this argument. Accordingly, the relevant grounds raised by the assessee are required to be allowed in principle. We order accordingly and direct the AO to re-calculate the disallowance under Rule 8D(2)(iii) of the Rules Issues:1. Treatment of trading loss on Mutual Funds2. Disallowance of interest for non-deduction of tax3. Disallowance under Rule 8D for expenses4. Restriction of Bad Debt claimAnalysis:Issue 1: Treatment of trading loss on Mutual FundsThe appeal addressed the classification of gains from the sale of Mutual Funds as either business income or capital gains. The assessee claimed the gains under 'business income,' citing consistency in their approach. However, the Assessing Officer (AO) categorized the gains as 'capital gains,' a decision upheld by the CIT (A). The Tribunal remanded the issue to the CIT (A) for reconsideration in light of CBDT Circular 6/2016, emphasizing the need to follow the circular's directives. The Tribunal referred to a similar case to support its decision and directed the CIT (A) to issue a speaking order after providing the assessee with a fair opportunity to be heard.Issue 2: Disallowance of interest for non-deduction of taxThe second ground of appeal concerned the disallowance related to interest payments due to non-deduction of tax under section 194A. Both parties acknowledged that a relevant Board Circular issued post-adjudication was not considered by the CIT (A). The Tribunal allowed the issue in principle but remanded it to the CIT (A) for a fresh decision after considering the subsequent developments and providing the assessee with a fair hearing.Issue 3: Disallowance under Rule 8D for expensesThe third ground of appeal focused on the disallowance under Rule 8D(2)(iii) of the Income Tax Rules 1962. The assessee argued that the CIT (A) incorrectly applied the provisions of the rule on the entire average investment without excluding non-dividend yielding investments. The Tribunal agreed with the assessee, citing legal precedents, and directed the AO to recalculate the disallowance under Rule 8D(2)(iii) after excluding non-dividend yielding investments.Issue 4: Restriction of Bad Debt claimThe final ground of appeal pertained to the restriction of the Bad Debt claim. The Tribunal noted that the CIT (A) had limited the claim despite satisfaction that the conditions for deduction were met. As the assessee's claim aligned with the statutory provisions, the Tribunal allowed the ground in favor of the assessee for statistical purposes.In conclusion, the Tribunal partially allowed the appeal for statistical purposes, addressing each issue raised by the assessee and providing detailed reasoning for its decisions.