TaxTMI 
TaxTMI 
TaxTMI 
2017 (2) TMI 589
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....by assessee are reproduced below:- "1. That the Ld. Commissioner of Income Tax (Appeals) erred in confirming the order of the Assessing Officer in respect his conclusion in the assessment order that the Long Term Capital loss arising out of the investment made through Port Folio Management Services of Rs. 60,83,332/- is speculation loss within the meaning of Explanation to Sec. 73 of the Income tax Act, 1961 and not Long Term Capital Loss claimed by the assessee. 2. That the Ld. Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs. 60,53,495/- made by the assessing officer under Sec. 14A of Income Tax Act, 1961 read with Rule 8D as against the claim of the assessee that no disallowance should be made u/s. 14A of IT Act, 1962, the rule 8D does not apply in the case of the assessee company and dividend income is not an income which does not form part of the total income under this Act as the same have already suffered tax u/s. 115O of Income Tax Act, 1961. 3. That the conclusion arrived at by the Ld. CIT(A) in the impugned order is based on wholly misconceived notion of facts, and on irrelevant considerations and misplaced case law and, therefore, the s....
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....ning processing and export of chrome ore & other mineral. Therefore, the provision as contained in Explanation to Sec. 73 of the Act is applicable to the assessee. The above transactions do not fall in the exception provided under Explanation to Sec. 73 of the Act. Accordingly, AO treated the income from the sale-purchase of share as speculation business of assessee. 6. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who confirmed the order of AO by observing as under:- "3. In ground no. 1, it has been contended that the AO was not justified in treating the long-term capital loss of Rs. 60,83,332/- and the shortterm capital loss of Rs. 1,58,121/- as speculation loss. The brief facts of the case are that the appellant has shown the loss made through the Portfolio Management Scheme PMS) as long or short term capital loss depending upon the period of holding. It was explained to the assessment stage that the appellant had parked its surplus fund in PMS with a view to maximize the profit on such investment; and, the same was shown as investment in the balance sheet. The AO did not accept the explanation. The AO noted that the issue has to be decided on the basis of the vol....
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....s of meager amount but the income from capital gains is much higher. Therefore, it is clear that assessee's intention was to carry out business activities. He vehemently supported the order of Authorities Below. 8. We have heard the rival contentions of both the parties and perused and carefully considered the material on record including the judicial pronouncements cited and placed reliance upon. The issue in the instant case relates to the treatment of capital gains income by Authorities Below as income from "business". After considering the volume, frequency and quantum of transactions, Authorities Below presumed that assessee was carrying out the activity of business. Therefore the profit and loss on such transactions should be treated as under the head "business". Admittedly, we find that that there is no dispute with regard to treatment of the aforesaid transactions in the books of account of assessee and aforesaid transactions were classified by assessee under the head "investment" and such practice was also followed by assessee in the earlier year also. We also find that the assessee in the earlier year has shown such transactions under the head "capital gains" and no disa....
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....nst the principles laid down, in order to evaluate whether they are investments or adventures in the nature of trade." From the above, it is very clear that the activities through PMS cannot be regarded as business activities on standalone basis. There are other factors which need to be considered. In the instant case the Revenue has been harping to treat the share transaction activity as business activity as the assessee has availed the services of PMS to maximize the profit. At the end we conclude that the assessee has been showing income under the head "capital gains" from the sale-purchase of securities which is held for a period more than 12 months consistently then the same has to be treated as income under the head "capital gains" only. Similarly, the transactions for the sale-purchase shares carried out through PMS cannot be regarded as business transactions for the reasons discussed above. Therefore, we are inclined to reverse the order of Authorities Below and this ground of assessee is allowed. 9. Next issue raised by assessee in ground No.2 is that Ld. CIT(A) erred in confirming the order of AO by sustaining the disallowance of Rs. 60,53,495/- u/s 14A r.w.s. 8D of t....
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....ous Benches of the ITAT. The Ld. AR reiterated the submissions made at the assessment stage. It was also argued that dividend is chargeable to income tax at the distribution stage and cannot be treated as exempt income. I do not find substance in the submissions. The dividend income is not chargeable to tax in the hands of the appellant; and consequently, it has to be treated as exempt income. The AO has made the disallowance in accordance with the provisions of section 14A read with Rule 8D which is not in dispute. In view of the above, the order of the AO calls for no interference. Ground no 2 is dismissed." Aggrieved by this, assessee has come up in appeal before us. 12. Before us Ld. AR submitted that no borrowed fund was utilized in making such investment and there was sufficient fund available with the assessee in the form of share capital and free reserves. Ld. AR in support of assessee's claim drew our attention on its balance sheet where shareholders funds of Rs. 240,68,81,386/- was shown in the balance sheet which is placed on page 46 of the paper book. He further submitted that assessee has not paid any managerial remuneration to its Director. Therefore, no expenses c....
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....urred in relation to non-exempted income. If he fails to do so, they would have no option but to apportion the composite expenditure between exempted income and non-exempted income and disallow the expenditure in relation to exempted income in terms of provisions of Sec. 14A." Accordingly we're of the view that there was no option available to the AO except to resort to the provisions of section 14A read with rule 8D of income tax rules. The argument of the learned AR that that is no managerial remuneration expenses claimed by the assessee in its profit and loss account is also not tenable. It is because the provisions of section 14A do not limit the disallowance to the extent of managerial remuneration. The disallowance envisaged in the section 14A of the Act extends to all the administrative expenses claimed by the assessee in profit and loss account. The learned AR drew our attention on page 54 of the paper book where the details of administrative & other expenses were placed. On perusal of the same we find that the assessee has claimed total expenditure of Rs. 4,14,08,065/-. Out of the same a sum of Rs. 2 crores was donated to charitable trust which in our considered view has....