TaxTMI 
TaxTMI 
TaxTMI 
2020 (12) TMI 396
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....ala Chem 1.4.09 to 31.3.10 1,95,586 2,66,71,998 1,77,582 2,89,13,458 83,24,062 2 Educom -do- 530 18,25,801 800 24,68,562 6,42,761 3 Hercules -do- 36,930 63,91,595 43,428 73,57,070 3,66,303 4 Others -do- 57,612 1,20,51,392 61,247 1,02,17,386 27,619 4. According to AO from the above chart, the assessee regularly engaged in purchase and sale of shares with a motive of earning a profit. The profit made is high involving an element of uncertainty. Further, the assessee utilized borrowed funds for trading of shares and he show caused the assessee why above said amount on account of profit should not be treated as business income. The assessee made his contentions vide letter dated 01-03-2013 which is on record by the AO in his order from pages 2 to 4. The AO considered the written submissions of assessee and discussed the same in paras 3.4 to 3.8 and held that the intention of assessee in buying the shares is not to derive income by way of dividend but to earn profits on sale of shares and added above said amount to the total income of the assessee holding that it is income from business. 5. Before CIT(A) in First Appellate proceedings, the assessee conte....
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....ant which indicates the intention of assessee for investment and referred to pages 68 and 69 of the paper book. The assessee received dividend income for the year under consideration and for A.Y. 2009-10 shown the said shares in investment portfolio. The assessee also valued the stock of shares on the basis of average cost of the respective shares in investment portfolio. The assessee following the same declared the profit earned on shares in investment portfolio for A.Ys. 2008- 09 and 2009-10 as capital gain and the respondent-revenue accepted the same under scrutiny proceedings u/s. 143(3) of the Act. The ld. AR placed reliance on the decision of Hon'ble High Court of Bombay in the case of CIT Vs. Gopal Purohit reported in 336 ITR 287 and prayed to allow ground No. 1 raised by the assessee. 7. The ld. DR, Shri S.P. Walimbe submits that the treatment in the books of assessee is not conclusive, if the volume, frequency and regularity with which the transactions are carried out indicate systematic and organized activity with a profit motive, then, it becomes business profit and not capital gain. The assessee does not have a separate portfolio of shares held as investment and as sto....
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....hares, we find were held for more than six months which were purchased during earlier year i.e., A.Y. 2009-10 and current year reflected in Page Nos.69 and 78 of the Paper Book. We note that the respondent Revenue accepted the treatment of gains arising from sale of shares as capital gains in earlier assessment years 2008-09 and 2009-10 and there is no dispute by the ld. D.R. before us regarding the same. Following the same treatment, the assessee assessed the gains from the investment portfolio as income from capital gains in the year under consideration. 9. Coming to the Hon'ble Jurisdictional High Court of Bombay in the case of Gopal Rohit reported in 336 ITR 287 was pleased to uphold the order of Tribunal in holding the delivery based transactions are in the nature of investments and profit received thereon should be assessed as capital gains. We note that the respondent Revenue raised three substantial questions of law before the Hon'ble High Court of Bombay : (i) the Tribunal erred in treating the profits arising from sale of shares from investment portfolio as capital gains, (ii) not justified in holding the principle of consistency and (iii) not justified in treati....
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.... intention of the assessee as regards to the nature of transaction without appreciating that the entries in the books of accounts alone are not conclusive proof to decide the income ?" 2. The Tribunal has entered a pure finding of fact that the assessee was engaged in two different types of transactions. The first set of transactions involved investment in shares. The second set of transactions involved dealing in shares for the purposes of business (described in para 8.3 of the judgment of the Tribunal as transactions purely of jobbing without delivery). The Tribunal has correctly applied the principle of law in accepting the position that it is open to an assessee to maintain two separate portfolios, one relating to investment in shares and another relating to business activities involving dealing in shares. The Tribunal held that the delivery based transactions in the present case, should be treated as those in the nature of investment transactions and the profit received therefrom should be treated either as short-term or, as the case may be, long-term capital gain, depending upon the period of the holding. A finding of fact has been arrived at by the Tribunal as regards th....
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.... of Rs. 2,03,834/- and claimed exemption under the Act. The AO show caused why the provisions under Sec.14A r.w.r. 8D(2)(ii) shall not be applied. It was contended that no expenditure incurred in earning the exempt income and the said shares which yield exempt income were purchased in earlier year and the same were held under the head "Investment" portfolio. We note that the same has been in the Balance-Sheet as on 31.03.2009 during the year under consideration. Before ld.CIT(A) also the same contentions have been raised by the assessee, however the ld.CIT(A) went on to uphold the disallowance made by the AO by applying Rule 8D of I.T. Rules. 13. The contention of Shri Prateek Jha, Ld.A.R. is that the disallowance made for the purpose of Sec.14A of the Act by applying Rule 8D(2) of Income Tax Rules is not maintainable in view of the fact that there was no expenditure incurred on the remaining exempt income. He further contended that the shares have been purchased during the year under consideration and also in earlier years and there cannot be disallowance more than the exempt income. He prayed to delete the addition as confirmed by the ld.CIT(A). We note that assessee earned exe....
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....orrowed funds which were dedicatedly used for investment in securities to earn such exempted Dividend income. The disallowance under Section 14A cannot be wild guesswork bereft of ground realities. It has to have a reasonable and close nexus with the factually incurred expenses. It is not deemed disallowance under Section 14A of the act but an enabling provision for assessing authority to compute the same on the given facts and figures in the regularly maintained Books of Accounts. The assessing authority also could not have called upon the Assessee himself to undertake the exercise of computing the disallowance under Section 8D of the Rules. Such abdication of duty is not permissible in law. Since no such exercise has been undertaken by the assessing authority, the case calls for a remand." 7. Gujarat High Court, in the case of Commissioner of Income-tax-I Vs. Corrtech Energy (P.) Ltd.3, has held and observed as under : "4. Counsel for the Revenue submitted that the Assessing Officer as well as CIT (Appeals) had applied formula of rule 8D of the Income Tax Rules, since this case arose after the assessment year 2009-2010. Since in the present case, we are concerned with the a....