TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 562
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....cular. 3) That the CIT (Appeals)/AO has erred on facts and in law in increasing the disallowance u/s 14A by Rs. 77,82,133, without factoring the assessee himself had disallowed Rs. 24,38,508. 4) That both the Ld. CIT(A) and Ld. AO erred in law and in facts in appreciating that strategic investments in Dabur India Limited as the promoter shareholder, would not form part of disallowance u/s 14A. 5) That the CIT (Appeals)/ AO has erred on facts and in law in disallowing the business expenses of Rs. 9,44,390 on adhoc basis @ 10%. 6) That the above grounds of appeal are independent and without prejudice to one another. 2. Briefly stated facts of the case are that the assessee is engaged in the business of sale and purchase of shares and mutual funds. The assessee filed return of income for the year under consideration on 28.11.2014, declaring income of Rs. 9,49,46,119/-. The return filed by the assessee was selected for scrutiny assessment and statutory notices under the Income-tax Act, 1961 (in short 'the Act') were issued and complied with. In the assessment completed under section 143(3) of the Act on 23.12.2016, the Assessing Officer made certain additions/disallowances. The ....
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....ot be categorized as an investor, especially when the aforesaid facts speak otherwise and the ld. AR did not place any material, other than resolution dated 22.4.2005, before us while the auditor reports and facts for the years under consideration ,reflecting intention of the assessee, lead us to the conclusion that the assessee is continuing its activities as in earlier years of a trader in shares. .As observed in Sutlej Cotton Mills Supply Agency Ltd. (supra), it is a matter of first impression with the Court whether a particular transaction is in the nature of trade or not. , it is not even the assessee's case that they had held all the shares for a long duration. The facts and circumstances of the case before us, when viewed in the light of principles laid down in the various decisions referred to above, lead us to the conclusion that the voluminous share transactions were in the ordinary line of 24 ITA nos.1118,942&943/Del./2010 the assessee's business; purchase of shares by them was not for the purpose of earning dividend, but with the dominant intention of resale in order to earn profits; the profit made by them is not of mere enhancement of value of the shares, but ....
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.... NBFC, which was also in the business of sale and purchase of shares and mutual fund. In so far as transactions in mutual funds are concerned, the same has been offered under the head 'Profits and Gains of Business and Profession'. However, various shares which has been held under the investment portfolio on which assessee has been shown under the head Long-Term Capital Gain and Short-Term Capital Gain as per the details incorporated above. The income earned by the assessee from various sources was as under: - Particulars Asset Type Amount Income from Business (A) a)Trading in units of Mutual Funds; b) Income from Interest; c)Incentive and Miscellaneous Income 360,77,965 Income from Capital Gains (B) Income from Capital Assets - Investment in EquitiesLTCG11,48,78,740 (85%) STCG2,02,28,220 (15%) 13,51,06,960 Income from other Sources (C) Dividend earned from investment in equities 8,19,14,172 15. One of the main contentions of the Revenue which has been strongly harped by the Tribunal in the earlier years is that, assessee prior to 31st March, 2004 was holding shares as 'stock in trade', hence intention was to do business only and mere classification in books a....
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....ank can never be treated as acquired for trading purpose. Hence any gain arising from sake of these two shares has to be assessed as 'capital gain'. 16. Further, from the perusal of details shown under LTCG of other scrips also, we find that the same have been acquired in the years 2005, 2006 and 2007 and were treated as part of investment and the holding days of these shares are ranging from 372 days to 828 days. These shares were not converted from stock as on 01.04.2004, because they have been acquired in the later years and from the date of acquisition, always been kept as investment in the books and later on sold after more than a year on which gain has been shown under the head 'Long Term Capital Gain'. Nowhere it has been laid down that the assessee who is dealing in shares cannot maintain two separate portfolios, one for the trading purpose and other for the investment purpose and there is no provision that shares held in investment portfolio have to be treated as part of stock. The most paramount factor which needs to be examined in such cases is, whether the intention of the assessee while acquiring shares was for investment purpose or for trading in future for profit. ....
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....transactions, give them a flavour of "trade"; the magnitude, frequency and the ratio of sales to purchases on the total holdings is evidence that the assessee had not purchased the shares as an investment, but with the intention to trade in such scrips. In the light of view taken in the aforesaid decisions, including in Wallfort Financial Services Ltd.(supra) relied upon by the Id. DR, we are of the opinion that the Id. CIT(A) was not justified in accepting the claim of the assessee as investor in shares especially when the nature of transactions in the years under consideration was similar to what the assessee had undertaken hither to and turnover of the assessee continually increased in the years under consideration. Accordingly, we vacate the findings of the Ld. CIT (A) and restore the order of the AO. Therefore, ground no.1 in these appeals is allowed." If the aforesaid ratio and principle of the Tribunal is to be followed as it is, then as observed in the earlier part of the order, in so far as the transaction of shares of Punjab Tractors Ltd. and ABN Amro are concerned, right from day one it was acquired as a part of investment only and was classified as such in books right....
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....clude property of any kind held by an assessee, whether or not connected with his business or profession, but does not include any stock-in-trade or personal assets subject to certain exceptions. As regards shares and other securities, the same can be held either as capital assets or stock-in-trade/ trading assets or both. Determination of the character of a particular investment in shares or other securities, whether the same is in the nature of a capital asset or stock-in- trade, is essentially a fact-specific determination and has led to a lot of uncertainty and litigation in the past. 2. Over the years, the courts have laid down different parameters to distinguish the shares held as investments from the shares held as stock- in-trade. The Central Board of Direct Taxes ('CBDT') has also, through Instruction No. 1827, dated August 31, 1989 and Circular No. 4 of 2007 dated June 15, 2007, summarized the said principles for guidance of the field formations. 3. Disputes, however, continue to exist on the application of these principles to the facts of an individual case since the taxpayers find it difficult to prove the intention in acquiring such shares/securities. In th....
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....ng manner:- F. No. 225/12/2016/ITA.II Government of India Ministry of Finance Department of Revenue (CBDT) North Block, New Delhi, dated the 2nd of May, 2016 To Principal Chief-Commissioners of Income-tax/ Principal Directors General of Income-tax Subject: - Consistency in taxability of income/loss arising from transfer of unlisted shares under Income-tax Act, 1961-regd Regarding characterization of income from transactions in listed shares and securities, Central Board of Direct Taxes ('CBDT) had issued a clarificatory Circular no. 6/2016 dated 29th February, 2016, wherein with a view to reduce litigation and maintain consistency in approach in assessments, it was instructed that income arising from transfer of listed shares and securities, which are held for more than twelve months would be taxed under the head 'Capital Gain' unless the tax-payer itself treats these as its stock- in-trade and transfer thereof as its business income. It was further stated that in other situations, the issue was to be decided on the basis of existing Circulars issued by the CBDT on this subject. 2. Similarly, for determining the tax-treatment of income arising from transfe....
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.... Gain' same cannot be taxed under the head business income especially in the light of the categorical clarification by the CBDT. 3.8 Further, the Tribunal in the assessee's own case for assessment year 2010-11 (ITA No. 701/2015 in order dated 02/01/2019) following the order of the Tribunal for assessment year 2008-09, 2009-10 in 2011-12 upheld the activity of the parties on sale of the shares assessable under the head capital gain. The relevant finding of the Tribunal reproduced as under: "5. Thus, respectfully following the precedents of the earlier years and as a principle of consistency, we uphold the order of the CIT(A) that long term capital gain/capital loss cannot be treated as business income or loss and also long-term gain cannot be treated as business income. Accordingly, ground no. 1 raised by the Revenue stands dismissed." 3.9 Further, in assessment year 2012-13 i.e. immediately preceding assessment year, the Tribunal in ITA No.4711/Del/2016 in order dated 26/03/2018 held the activity of purchase on sale of the shares assessable under the head capital gain. The relevant finding of the Tribunal is reproduced as under: "6. We have carefully considered the rival co....
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....bsp; Less: Expenses on account of income on which no activity has done in the previous year Total exempt Income Dividend received 312842907 Long Term gain u/s 10(38) 31901839 Tax free interest 52856859 397601605 Less: Dividend reed from DIL 302739200 % of DIL dividend in exempted income 76% 7782133 Disallowance u/s 14A 2438505 5.2 We find that the assessee firstly computed the disallowance under section 14A as per Rule 8D of the Act and, thereafter, reduced the disallowance in the proportion of dividend income from shares of Dabur India Ltd. The claim of the assessee that no expenditure was incurred in relation to the earning of dividend income from the Dabur India Ltd. The assessee is one of the promoters of the group company Dabur India Ltd. and no investment activity has been conducted by the assessee company in holding the shares of the Dabur India ltd. The learned Assessing Officer rejected this contention of the assessee and made addition of Rs. 77,82,133/- i.e. the amount which was reduced by the assessee fr....
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....has duly rejected the action of the assessee of reducing the expenses related to earning of the dividend income from the shares of M/s. Dabur India Ltd. Accordingly, we reject the contention of the assessee and upheld the finding of the Learned CIT(A) on the issue in dispute. The ground No. 2 of the appeal of the assessee is accordingly dismissed." 5.6 Hence, respectfully following the findings of the Tribunal (supra), the Grounds No. 3 of the appeal of the assessee is dismissed. 6. In the Ground No. 4, the assessee has contested that the investment in Dabur India Ltd. being a strategic investment would not form part of the total income under the Act. However, in view of the decision of the Hon'ble Supreme Court in the case Maxopp Investment Ltd Vs CIT in 402 ITR 640, the issue is covered against the assessee and, therefore, this grounds of appeal is dismissed. 7. The grounds no. 5 relates to disallowance of business expenses Rs. 9,44,390/-. Before us, the learned counsel for the assessee fairly accepted that this issue is covered against the assessee by the order of the Tribunal in assessment year 2013- 14. The facts of the case are that the assessee debited business promotion ....