2015 (8) TMI 408

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....o. 8699/Mum/2011 2. The revenue through its grounds of appeal has agitated the action of the CIT(A) in treating the profit of Rs. 49875149/- earned on redemption of mutual funds as Long Term Capital Gains(LTCG) as against business income treated by the AO. The contention of the revenue is that since the assessee is primarily an investment company, so the income earned should be treated as business income. We find that this issue has been dealt by the Ld. CIT(A) in Para 4 of his order. The Ld . CIT(A) after detailed discussion of the matter has observed that the assessee company had earned long term capital gains on redemption of mutual funds held for more than 1 year. It had been consistently showing the same as investments and assessed ....

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....nts in the balance sheet. The assessee company had appointed Kotak Securities Ltd as Investment Manager and all the transactions were carried out by them. It was submitted on behalf of the assessee company that the single transaction of sale of 12000 shares of Kotak Mahindra Bank Ltd was executed on a single date 13.3.2008 through single contract note and it was therefore contended that the same be treated as short term capital loss. The AO however treated the same as business loss. 6. The Ld. CIT(A) also confirmed the findings of the AO on this issue observing that in this case both purchase and sale transactions had been executed on a signal day and therefore it represents the trading activity. 7. The assessee before us has submitte....

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.... 12. The Ld. AR of the assessee before us has submitted that the AO has ignored the working submitted by the assessee and that the AO had not established nexus between the expenditure and the exempt income. 11. We have considered the rival submissions of the ld. representatives of the parties. It may be observed that in the case of 'Godrej & Boyce Manufacturing Co. Ltd.' 328 ITR 81, the Hon'ble Bombay High Court has held that Rule 8D r.w.s. 14A(2) is not arbitrary or unreasonable and also not retrospective and applies from A.Y. 2008-09. It has been further held that under section 14A of the Income Tax Act, resort can be made to Rule 8D of the Income Tax Rules for determining the amount of expenditure in relation to exempt in....

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.... Rule 8D against the mandate of the provisions of section 14A of the Income Tax Act. The ld. CIT(A) also ignored the mandate of the provisions of section 14 A, while confirming the disallowance. 13. So keeping in view of the overall facts and circumstances of the case, we restore this issue back to the file of the AO with a direction that the AO will give opportunity to the assessee to place on record all the relevant facts including its accounts and then examine the computation/calculation made in this regard by the assessee having regard to the accounts of the assessee. The AO will be at liberty to call for any record/evidences or statement etc. from the assessee as may be required by him for deciding the issue under consideration. Aft....