TaxTMI 
TaxTMI 
2016 (4) TMI 1050
X X X X Extracts X X X X
X X X X Extracts X X X X
....of share of Rs. 39,74,24,220/- as long term capital loss and short term capital loss." 3. Briefly stated facts are that the assessee is a public substantially interest company following mercantile system of accounting. The assessee company is a non-banking financial company u/s. 45(1A) of the RBI Act, 1934,. The assessee is an investment company having main object of investment in shares. According to AO, the assessee has disclosed long term capital loss to the tune of Rs. 3,34,30,136/- in its P&L Account for the year ended 31.03.2009. Assessee also disclosed short term capital loss of Rs. 36,39,94,084/- in computation of income shown under the head capital gains. According to AO, the entire loss was claimed to be carried forward in the next year. During the course of assessment proceedings, the AO required the assessee to produce the contract notes for verification of long term capital loss and short term capital loss. The AO on verification of these contract notes noted that the purchase and sale of shares were made on frequent dates and also utilization of interest bearing borrowed funds in purchase of shares and accordingly, he treated the long term capital loss and short te....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of fund is required to be done. On examination of the Balance Sheet for the year it is found that Total Investment into shares/securities is Rs. 89.33 Crores for the current year and in the earlier year is was Rs. 128.53 crores. Whereas total investments into Loans & Advances is Rs. 5.91 Crores for the current year earlier year it was NIL. So the main business of the assessee is definitely in dealing shares not giving loans & advance. In addition to the profit on sale of shares, the assessee has income from on securities Rs.l,33,91,344.64 & dividend income of Rs. 2.87 crore and dividend has been claimed exemption. Interest income has been offered under the head "Income from Business & Profession" there is no other income from 'House Property', 'Other Source' or 'Capital Gains'. Therefore, the assessee has the main Income/Loss from Business as discussed above. As such Explanation below section 73 of the Income Tax Act applicable in assessee's case which states that Where any part of the business of a company consists in the purchase and sale of shares of other companies, such company, shall for the purpose of this section, be deemed to be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ied upon the judgment of Bombay High Court in the case of Gopal Purohit 228 ITR 582 (Bombay) and the case of CIT Vs. Consolidated Invest Holding Ltd. 337 ITR 264 Delhi High Court to support his contention the purchase of shares of OBC was in nature of investment rather than in nature of business and explained that the shares were sold as the prices started declining and the appellant wanted to stop its loss. There were no intraday transactions. The appellant had claimed short term capital gains on the investments in shares AY 2007-08 and the same was accepted by the AO for AY 2007-08. Keeping in view of these facts and circumstances the loss arising from sale of shares was in the nature of long term capital loss and short term capital loss rather than business loss and accordingly section 73 cannot be invoked. Therefore the ground no.2 and 3 are allowed." Aggrieved against the order of CIT(A) revenue is now in appeal before Tribunal. 5. We have heard rival submissions and gone through facts and circumstances of the case. We find that the assessee filed its return of income by declaring long term capital loss of Rs. 3,34,30,136/- and short term capital loss of Rs. 36,39,94,084....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rs. 112.24 per share as on 27.10.2008 to the last sale was made. According to assessee, in the 6th month the price of share fell by 38% and hence, it has to sell the shares to liquidate its holding in the scrip of Oriental Bank of Commerce and invest in some other shares owing to steep decline in the price of these shares. Ld. Counsel for the assessee also argued and drew our attention to pages 71 to 76 wherein it can be seen that the period of holding or Oriental Bank of Commerce's shares by assessee ranging between 556 days to 213 days i.e. between 18 months to 7 months. In view of these facts, ld. Counsel for the assessee stated that the evidence and submissions clearly prove that the assessee was not a dealer in shares but only in investor and during the relevant assessment year it has liquidated the shares of Oriental Bank of Commerce held by it, purchased in AY 2007-08 and 2008-09, and due to steep decline in price of shares resulting in huge long term and short term capital loss. In term of the above arguments, ld. Counsel for the assessee stated that the loss arising out of sale of shares of Oriental Bank of Commerce is long term and short term and not business loss as hel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave been made under delivery based segment." 7. In view of the above facts, we are of the view that the assessee has established that the shares held by it as investment are capital asset and sale of capital asset being shares held as investment for a considerable period i.e. either little less than one year or more than one year are assessable as short term capital gain/loss or long term capital gain/loss and not business income. Similar view is taken by Hon'ble Bombay High Court in the case of CIT Vs. Gopal Purohit (2011) 336 ITR 287 (Bom.), wherein it has been held as under: "Held, dismissing the appeal, (i) that it was open to the assessee to maintain two separate portfolios, one relating to investment and another relating to business of dealing in shares, that a finding of fact had been arrived at by the Tribunal as regards the two distinct types of transactions, namely, those by way of investment and those for the purposes of business, and this warranted no interference. (ii) That there should be uniformity in treatment and consistency when facts and circumstances for different years were identical particularly in the case of the same assessee. (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....acquisition of such shares in public issue with the intent of holding them for a long period of time to achieve long-term appreciation and the mere fact that the shares were sold in a short span of time of its acquisition due to steep and unanticipated rise in stock market does not mean that the intention of the assessee at the time of purchase of shares was not to hold them for a long period of time or to deal in them. This was a pure question of fact arrived at by CIT(A) and the Tribunal, and rightly so that the profit arisen from sale of shares of ONGC during the relevant previous year was to be treated under the head „capital gain‟ and not „profit or gain of business and profession‟. 9. Another aspect discussed by AO as regards to frequency of transaction, the investor aims at wealth maximization and has to divest the shares at the opportune time to prevent depreciation in investment. And Investor has to take appropriate decision after weighing the risk of carrying the investment with the return thereon. In the process, the assessee may required to sell off part of his investments at appropriate intervals which may lead to high turnover in the investm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....et amount of Rs. 37,63,100/- over and above the proportionate disallowance made by assessee was further disallowed. The total expenditure debited in P&L A/c for the whole financial year as per P&L A/c was Rs. 34,63,114/- only. Therefore, the disallowance made u/s. 14A read with Rule 8D be restricted to a total of Rs. 34,63,144/- as against Rs. 71,20,710/- determined by the AO i.e. the disallowance should be restricted to actual expenditure debited in P&L a/c in relation to earning of tax free dividend income credited in P&L a/c. Therefore this ground is partly allowed." Aggrieved, revenue preferred second appeal before Tribunal on this issue. 14. We have heard rival submissions and gone through facts and circumstances of the case. We find that the assessee has earned dividend of Rs. 2,87,49,680/- on a total investment in shares at a figure of Rs. 127,68,82,654/- as on 31.03.2008 and of Rs. 28,62,60,276/- as on 31.03.2009. The assessee has explained that its own funds comprising of shareholders' fund and reserve and surplus stood at Rs. 142,17,62,794/- as on 31.03.2008 and at Rs. 106,30,12,044/- as on 31.03.2009. The assessee explained that the assessee's own funds during the ....