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TaxTMI 
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2018 (5) TMI 345
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....e and in law, the Ld. CIT(A) erred in restricting the disallowance u/s. 14A r. w. r. 8D to Rs. 4, 69, 605/- as against Rs. 33, 49, 507/- made by the AO without appreciating that nothing in the provisions of Sec. 14A has been provided that expenditure in relation to earning exempt income cannot exceed exempt income. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in treating, the income of Rs. 1, 70, 31, 749/- arising from "the investment portfolio" as Short Term Capital Gain instead of Business Income, without appreciating that main characteristics of transactions namely quantum, frequency, borrowed funds, period of holding show that shares are traded as business transaction in terms of Board Circular....
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....Total Assets as on March 31 , 2009 17,020,048 5. Closing Total Assets as on March 31, 2010 74,111,802 6. Average Total Assets 45,565,925 7. Interest Paid 3,539,716 (i) Actual expenditure incurred - (ii) Interest Paid * Average Investment Average Total Assets 3,093,390 (iii) One-half percentage of Average Investment 199,102 TOTAL DISALLOWANCE (i)+(ii)+(iii) 3,292,492 TOTAL DIVIDEND INCOME 469,605 AMOUNT OF DISALLOWANCE UNDER SECTION 14A RESTRICTED TO Rs. 4,69,605/- The AO in his assessment order disallowed amounting to Rs. 33, 49, 507/- under section 14A of the Act read with rule 8D of the Income-tax Rules, 1962 by disallowing the proportiona....
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..../- as business profit in respect of the Trading Portfolio (including other business profit) which have been offered to tax. The Assessing Officer during the course of assessment proceedings held that the assessee to be only in the business activity of share trading rather than an investor in shares and securities. The Assessing Officer observed that the assessee has shown short term capital gain of Rs. 1, 70, 31, 749/- on account of sales of shares and securities. The Assessing Officer observed that there were voluminous and regular purchase and sale transactions of shares which were in the nature of business transactions. On verifying the same, the Assessing Officer concluded that the assessee is not an investor in securities but has been ....
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....It has also been contended that the shares and securities in investment portfolios were purchased with the intention to earn capital appreciation. It is also asserted that Income from investment portfolio was offered to Capital Gains and that from trading portfolio was offered to tax as business income. The Appellant had further referred to CBDT Circular no. 4/2007 quoted above and hence not repeated. 5.2.3 I find that in his remand report the AO has nowhere established that the copies of relevant board resolutions were asked for to support the claim of "intention" of investment by the appellant. The appellant could not have produced what was never asked for; Therefore, I find that the exception (c) to Rule 46A as mentioned above i....
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....idence or components of audited accounts. His only reasons appear to be the volume and frequency of transactions in the investment portfolio and the lack of proof of intention that the impugned shares and securities were part of investment. In terms of a company, decisions/resolutions of the board of directors are reflections of intentions or views of the company. The AO has not shown why the above mentioned board resolution do not satisfy his need for seeing an evidence of the intention for investment. 5.2.8 In view of the above, the AO is directed to treat impugned amount of Rs. 1, 70, 31, 749/- as income from short term capital gain instead of business income. This ground of appeal is allowed. " Against the above order the Re....
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....nal as regards the existence of two distinct types of transactions namely, those by way of investment on one hand and those for the purposes of business on the other hand. Question (a) above, does not raise any substantial question of law. " 11. Reading of the above makes it clear that the transaction in the aforesaid decision before the Hon'ble Bombay High Court were delivery based transaction. In the present case no where the assessee has claimed that these transactions are delivery based. Despite noting the said facts in the Hon'ble Bombay High Court decision, the learned CIT(A) has totally ignored the same. Only the aspect that assessee can maintain an investment and trading portfolio has been referred by the learned CIT(A) and the i....