TaxTMI 
TaxTMI 
TaxTMI 
2018 (8) TMI 1417
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....e assessee showed that the assessee had declared sales of equity amounting to Rs. 17,20,09,797/- and of mutual funds amounting to Rs. 12,06,18,410/-. Profit of Rs. 1,13,332/- was shown on derivates and a gain of Rs. 53,495/- was disclosed on options. Further, the assessee had shown total profit of Rs. 98,16,506/- and after reducing the exempt income of Rs. 3,72,151/- and after making a suo moto disallowance of Rs. 1,89,897/-, being expenses attributable towards earning of exempt income, the net taxable income of Rs. 96,34,253/- was offered to tax under the head "income from business". Apart from this, the Assessing Officer also observed that the assessee, in her individual capacity, had also purchased and sold equity, mutual funds and bonds and had declared short term as well as capital gains totalling to Rs. 65,38,895/-. The Assessing Officer was of the view that since the assessee was fully involved in the business of trading of securities and had offered income from business and profession to tax, she had shown some income under the head "capital gains" to take benefit of nil or lower rate of tax. The assessee was issued a show cause notice to explain as to why income shown unde....
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.... as business income by the AO. The CIT(A) has erred in not appreciating the fact that the quantum and dates of transactions in shares and mutual funds clearly indicates that the transactions are entered into continuously and regularly during the year under consideration and hence it is nothing other than business activity of the assessee." 3.0 The Ld. Authorised Representative (AR) submitted that as far as the assessee's appeal was concerned, the issue being agitated was the sustenance of disallowance of Rs. 8,14,313/- u/s 14A of the Act by the Ld. CIT (A). It was submitted that during the year under consideration, the assessee had carried out the business of trading in shares, mutual funds and derivatives and from such a business, the assessee had earned dividend income of Rs. 3,72,151/- out of which the assessee had disallowed Rs. 1,89,897/- u/s 14A of the Act voluntarily on account of expenses attributable to earning of such dividend income. He drew our attention to the working of the disallowance placed on page 68 of the paper book. It was further submitted that the assessee had also carried business in bonds and mutual funds with Citibank and YES Bank in her individual ca....
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....n treated as business income by the Assessing Officer. The Ld. Sr. DR submitted that it is undisputed that the business of the assessee is purchase and sale of equity, securities and future options. It was submitted that the same assessee is carrying out the same business with her own funds and the only difference is that the income from sale and purchase of few securities has been shown under the head 'capital gain'. It was submitted that the conduct of the assessee proves that she was engaged in the business of sale and purchase of securities in an organized and regular manner and was duly showing business income and showing some part of the income under a different head of income was just a ploy for avoidance of tax. The Ld. Sr. DR, while placing reliance on the detailed findings of the Assessing Officer in this regard, vehemently argued that the Ld. CIT (A) had erred in treating the business income as long term capital gains/short term capital gains. The Ld. Sr. DR also assailed the action of the Ld. CIT (A) in deleting the addition of Rs. 32,00,463/- by allowing benefit of indexation to the assessee. It was submitted that since the source of income was from business and not ca....
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....support of his contention. 7. We have heard the rival submissions and perused the material available on record. We take up the assessee's appeal first. The sole issue being disputed by the assessee is the sustenance of disallowance of Rs. 8,14,313/- u/s 14A of the Act. It is undisputed that the assessee had suo moto made a disallowance of Rs. 1,89,897/- u/s 14A of the Act being expenses attributable for earning dividend income of Rs. 3,72,151/-. However, the Assessing Officer also clubbed the dividend income of Rs. 19,10,682/- for the purposes of making disallowance although the assessee had claimed that no expenditure had been earned towards earning this dividend income on personal account. A perusal of the assessment order shows that the Assessing Officer has not recorded a finding as to why he was not in agreement with the assessee's claim that no expenditure for earning the dividend income of Rs. 19,10,682/- had been incurred. The issue of recording of satisfaction by the Assessing Officer has attained finality by the judgment of the Hon'ble Apex Court in the case of Godrej & Boyce Co. Ltd. vs. DCIT 394 ITR 449 (SC) wherein the Hon'ble Apex Court has observed as under:- "The....
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....e us is whether the income from capital gains as claimed by the assessee is to be treated as income from capital gains or is it to be charged to tax as business income as claimed by the department. The answer to this question will necessarily decide the second question before us is as to whether the benefit of indexation is allowable to the assessee in respect of capital gains or not if the income has to be assessed as business income. We find that the issue is no longer res integra. We find that this issue is squarely covered in favour of the assessee by the judgment of the Jurisdictional High Court in the case of CIT vs. Avinash Jain reported in 362 ITR 441 (Del). The relevant observations of the Hon'ble Delhi High Court are reproduced as under:- "Before us the Ld. Counsel for the revenue submitted that while the CBDT circular only mentioned that it was "possible" for a tax payer to have two portfolios, namely, an investment portfolio and a trading portfolio, the Tribunal has misunderstood the said circular by holding that the circular had "allowed" the assessee to maintain two types of portfolios. Although technically the Ld. Counsel for the revenue may be right but that reall....