TaxTMI 
TaxTMI 
2011 (10) TMI 494
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....ssessee declared surplus arising out of such sale as Long Term Capital Gain in its return for the impugned assessment year. Assessee had also claimed some expenditure which, as per the assessee, was necessary for carrying out its business activities. Assessing Officer, after conducting a scrutiny of books of accounts and other details produced by the assessee, completed the assessment on 30.12.2008 under Section 143(3) of the Act. While doing such assessment, the Assessing Officer disallowed a sum of Rs. 31,94,192/- out of total professional charges of Rs. 1,02,50,000/- for non-deduction of tax at sources, relying on Section 40(a)(iva) of the Act. Claim for Short Term Capital Loss carried forward from earlier year was also not allowed since, as per the A.O., for assessment year 2005-06, such Short Term Capital Loss was disallowed. However, the Assessing Officer accepted the surplus arising out of sale of shares of the M/s BPL Communications Ltd., as Long Term Capital Gain. 3. Thereafter, ld. CIT on 30.12.2009 issued a notice to the assessee requiring it to show cause why the assessment order should not be considered as erroneous and prejudicial to the interests of the reven....
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....Ltd. which were sold in the previous year relevant to impugned assessment year, was also done during that year. As per the assessee, there was no multiplicity of transactions nor was there any frequency in the sale of shares. Disposal of the shares in BPL Communications Ltd. was taken pursuant to a decision of all its shareholders to exit by making transfer to Essar Group. As per the assessee, frequency, continuity and regularity in carrying out the sale of shares as a trading activity was not there nor it ever intended to do such a trading activity. Placing reliance on Circular No.4/2007 dated 15.6.2007 of CBDT assessee submitted before the ld. CIT that it had classified the shares under the head "Investments", and therefore, as a natural corollary, surplus arising on sale therefore, could be taxed only under the head "Capital gains". Vis-à-vis the proposal for disallowing the professional charges and bank charges, submission of the assessee was that A.O. had already disallowed a part thereof for non-deduction of tax at source. Further, as per the assessee, professional charges of Rs. 1,02,50,000/- were incurred in connection with transfer of the shares of BPL Communication....
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....ares of BPL Communications Ltd. as business income after allowing such expenditure which was incurred wholly and exclusively for the purpose of business. 6. Now before us, learned A.R., strongly assailing the order of ld. CIT, submitted that assessee had never been in the business of trading in shares. The shares acquired during the previous year relevant to assessment year 2005-06, of BPL Communications Ltd. was shown under the head "investments". At no point of time, the shares were held as stock-in-trade. There was no repetitive purchase and sale of shares. Vis-à-vis the disallowance of professional charges, learned A.R. submitted that A.O. had already disallowed a part of this under Section 40(a)(iva) of the Act and hence, it could not be said that there was no application of mind in this regard. As per the learned A.R., such expenditure had to be allowed as a deduction irrespective of the head of income under which surplus arising out of sale of shares of BPL Communications Ltd. was considered. Similar was the contention with regard to bank charges also. In any case, as per learned A.R., ld. CIT before invoking powers under Section 263 of the Act, had never put ....
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....ng the payment. In view of this, the Professional Charges stated as TDS paid to the extent of Rs. 31,94,192/- (Rs. 1,02,50,000 - Rs. 70,55,808) was disallowed as not supported by proper evidence u/s 40(a)(iva)." Only mention regarding Long Term Capital Gain appear in the second sentence of the above para. The said sentence simply states that assessee had sold shares and admitted Long Term Capital Gain. No doubt, assessee might have shown the shares held in BPL Communications Ltd. under the head "Investments". However, nomenclature given in the balance sheet alone will not be sufficient to come to a conclusion that the shares were held as investments. Admittedly, assessee had made investments in shares in previous year relevant to assessment year 2004-05, which were sold by it in the previous year relevant to assessment year 2005-06. This is clear from its letter dated 10.2.2010 addressed to ld. CIT in reply to his notice under Section 263 of the Act (paper-book pages 24 - second para). In the previous year relevant to assessment year 2005-06, not only had it sold shares acquired during assessment year 2004-05, but had also made further acquisition of 49,97,69,241 shares of ....