TaxTMI 
TaxTMI 
2022 (4) TMI 968
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....ng both the sides and perusing the reasons given in the petition for condoning the delay which was mainly due to Covid-19 pandemic, we condone the delay and admit all the appeals for hearing. 3. First of all we will take up the appeals preferred by the revenue. Since grounds of appeal are common and facts are identical, we dispose of all the revenue's appeal by a consolidated order for the sake of convenience. Grounds of appeal raised by the revenue in ITA No. 268/Kol/2021 for AY 2012-13 are extracted below: "1. That in law and on the facts of the case, the CIT(A) erred in consenting to the contention made by the assessee without having any evidence on records to warrant the same. 2. That in law and on the facts of the case the CIT(A) was not justified in accepting assessee's estimate of expenditure incurred in relation to exempt income and again subject the same to be apportioned under sub-rule 2(ii) of Rule 8D. 3. That in law and on the facts of the case the CIT(A) was not justified in accepting assessee's estimate of expenditure incurred in relation to exempt income as Rule 8D of IT Rules already provide the cases where exact assessment of c....
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....nd which action of the Ld. CIT(A) was not challenged by the department/AO before this Tribunal which means the action of Ld. CIT(A) on this issue crystallized. Thus, the Ld. CIT(A) while adjudicating the grounds of appeal of the assessee challenging the action of the AO to treat the income from sale of shares and mutual fund as short term capital gain instead of business income was accepted by the Ld. CIT(A) by taking into consideration the CBDT Circular No. 6/2016 dated 29.02.2016 wherein it has addressed the issue on "Taxability of surplus on sale of shares and securities - Capital Gains or Business Income" wherein it was held as under: "CBDT realizing that major part of shares/securities transactions takes place in respect of the listed ones and with a view to reduce litigation and uncertainty in the matter in partial modification to the aforesaid Circulars, further instructs that the Assessing Officer in holding whether the surplus generated from sale of listed shares or other securities would be treated as Capital Gain or Business Income, shall take into account the following - a) Where the assessee itself, irrespective of the period of holding the listed sha....
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....the alleged ground that the ratio of Opening Stock. Purchases, sales and Closing Stock were not commensurate to show that the activities of the assessee were in the nature of business income. I have carefully examined this aspect and I find that the ratio of sales to closing stock of shares for the Ay 2008-09 is 1.145 for assessment year 2012-13 the ratio of sales to closing stock of shares is 3.666, for assessment year 2013-14 the ratio of sales to closing stock of shares is 3.921 and of Mutual funds is 1.144 and for assessment year 2014-15 the ratio of sales to closing stock of shares is 3.462 and of Mutual fund is 1.984. These ratios clearly show that the turnover of the assessee as compared to the closing stock in each of the years is considerably high and shows a clear pattern of regular trading in shares and mutual funds in an organized manner which is indicative of an activity of business rather than investment. It is also evident that the assessee has purchased shares and mutual funds out of borrowed funds on which it pays interest and therefore, this also goes to show that the assessee is involved in a business activity since an investor usually does not invest borrowed fu....
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.... permeating in the earlier years have not changed, and when certain position has been accepted by the department, then without any change in law, the consistent position/finding cannot be allowed to be changed. The Hon'ble Supreme Court has held and observed as under: "We are aware of the fact that, strictly speaking, res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following but where a fundamental aspect permeating through the different assessment years as been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasonings, in the absence of any material change justifying the Revenue to take a different view of the matter and, if there was no change, it was in support of the assessee-we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-tax in the earlier proceedings, a different and contradictory stand should have been taken. We ....
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....t expenses of the assessee in the formula for the purpose of rule 8D. However, only the amount of interest and expenses which have been allocated for the purpose computing the business income in shares and mutual funds can be considered in the formula for the purpose of rule 8D. Therefore, the AO is directed to recomputed the disallowance u/s. 14A, read with Rule 8D of the I. T. rules by only considering the figures of interest and other related expenses as have been allocated for the purpose of computation of Business Income in the first ground of appeal as decided earlier in this appellate order. The AO is directed accordingly. The grounds are partly allowed." 10. Aggrieved, the revenue as well as the assessee both are in appeal before us. 11. We have heard the rival submissions and perused the material placed on record. The Ld. AR submitted that the assessee is a dealer in shares and the income earned thereon was assessed as "Business Income". According to him, the dividend derived in the course of share trading is incidental to the principal business which is to earn profit. He thus contended that the provisions of Section 14A of the Act and Rule 8D cannot be applied in t....
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....her income by way of interest on securities shall be chargeable to income tax under the head 'income from other sources' or it is to fall under the head 'profits and gains of business and profession'. The Board, going by the decision of this Court in Nawanshahar case, clarified that it has to be treated as income falling under the head 'profits and gains of business and profession'. The Board also went to the extent of saying that this would not be limited only to co-operative societies/Banks claiming deduction under Section 80P(2)(a)(i) of the Act but would also be applicable to all banks/commercial banks, to which Banking Regulation Act, 1949 applies. 38. From this, Punjab and Haryana High Court pointed out that this circular carves out a distinction between 'stock-in-trade' and 'investment' and provides that if the motive behind purchase and sale of shares is to earn profit, then the same would be treated as trading profit and if the object is to derive income by way of dividend then the profit would be said to have accrued from investment. To this extent, the High Court may be correct. At the same time, we do not agree with the t....
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....Revenue challenging the judgment of the Punjab and Haryana High Court in State Bank of Patiala also fail, though law in this respect has been clarified hereinabove. (emphasis supplied) 13. We thus note that although the Hon'ble Supreme Court did observe in the case of a dealer in shares, earning dividend income from its stock-in-trade, may expose to the rigors of Section 14A of the Act, but at the same time we find merit in the Ld. AR's submissions that in the above judgment, the Hon'ble Supreme Court also extensively dealt with this issue in the Revenue's appeal in the case of a banking company, State Bank of Patiala (supra) and dismissed the same, wherein the High Court had held that, since the banking companies in the course of carrying on their banking business were required to hold shares & securities, the expenses were incurred in connection with such banking business and accordingly no disallowance was warranted u/s 14A of the Act. For this, the Hon'ble High Court had taken note of the Board's Circular No. 18 dated 02.11.2015 issued in relation to cooperative societies/banking companies and had also relied on the judgment of the Hon'ble Supreme Court in the case of CIT Vs....