TaxTMI 
TaxTMI 
2023 (10) TMI 662
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....n ignoring the decision dated 04.2014 of jurisdictional High Court in ITA Nos. 93, 226 & 227 of 2012 in assessee's own case for AY 2007-08 wherein the Hon'ble High Court has held that income of the assessee from sale of shares/securities/mutual funds by the assessee is chargeable to tax as Business Income as sole activity of the assessee was to invest in shares/securities/mutual funds as regular course of business and to earn profits from such investment. 1.b) Whether the Ld CIT(A) has failed to appreciate that the issue involved in the instant year has been adjudicated in favor of Revenue by the Hon'ble High Court in ITA No. 226 of 2012 in assessee's own case and the said judgment has a binding effect on the appellate authorities below. 1.c) Whether the Ld CIT(A) has erred in relying on CBDT circular 6 of 2016 (dated 29.02.2016) in accepting the contention of the assessee that the income of the assessee is chargeable to tax under the Head "Capital Gains", not appreciating the fact that: i) The Circular is meant to apply to situations where the assessee is holding dual portfolio i.e. shares held investment and shares held-as-stock in trade....
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....el submitted that the Hon'ble High Court had decided the issue of income on sale of Tata Mutual Funds (Dividend Plan) as business income but in the present case from the submissions of assessee noted by the Ld.CIT(A) in para 6.1 reveals that the impugned income was accrued to the assessee out of sale of investment in shares, which the assessee was holding for a period of thousand days i.e. maximum upto 3301 days. 3.1 Therefore, the Ld. Counsel submitted that the facts in the Judgment of Hon'ble High Court of Punjab & Haryana (supra) are distinct and dissimilar to the facts of the present case, therefore, the same cannot be applied to the present case blindly. He submitted that the Ld.CIT(A) has granted relief to the assessee after considering the entire factual position emerging from Balance Sheet of assessee and CBDT Circular No.6 dated 29.02.2016. Therefore, first appellate order was kindly be uphold dismissing the appeal of Revenue. 4. On careful consideration of submissions from the judgment of Hon'ble Punjab & Haryana High Court in three appeals (supra) including ITA No.226/2012 pertaining to present assessee the identical issue under identical circumstances has been dec....
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....alance forward on account of short term capital loss of assessment year 2004-05 to the tune of Rs. 1,93,776/- and for the assessment year 2005-06 to the tune of Rs. 2,49,934/-, had been allowed by him. 28. So far as ITA Nos.226 and 227 of 2012 are concerned, unlike case of ITA No.39 of 2012, activities of the assessee in these appeals are so frequent and regular in their operation and in the usual course of business activity of the assessees that no case for treating the impugned income as resulting from transactions labelled as 'tenurial investments', is made out." 5. From para 6.1 of first appellate order we note that before Ld.CIT(A) the assessee submitted detailed factual explanation and submissions on 18.05.2015, 25.02.2015 and 02.09.2015, which are as follows: - "6.1 In support of grounds No. 2 and 2(b) of appeal, the assessee company through its learned AR has filed written submissions vide letters dated 18.05.2015, 25.08.2015 and 02.09.2015, the relevant paras of which read as under:- Written submissions dated 18.05.2015 Ground No. 1 - That the Ld. Assistant Commissioner of Income Tax. Circle V has wrongly computed and assessed total....
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....ht on record to show that the assessee company has converted capital investment into stock-in-trade. 7. There is no day to day transaction of sale & purchase of investments/mutual funds nor any intra day transactions have been made. 8. These investments has always been shown as investment and valued at cost as per AS-13. 9. Prior to AY 2006-07, it has always been accepted as investment. 10. The Hon'ble High Court in the earlier years has treated the profit on sale of mutual fund as 'Business Income'. 11. The issue before the Hon'ble High Court in AY 2006- 07 in assessee's own case is as under: "Whether on the facts and in law, the Hon'ble ITAT was legally justified in upholding the decision of CIT(A)-II, Ludhiana and in holding that the income on sale of Tata Mutual Funds (dividend plan) are assessable as income from Short Term Capital Gain inter-alia on the ground that the units of mutual funds are not tradable and that therefore the assessee had made investment in non tradable commodity." 12. The Hon'ble Supreme Court has repeatedly held that a finding of facts given by the Hon'ble ITAT can be interfered by the Hon'bl....
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....be allowed. 3. As already submitted by the assessee during the assessment proceedings, the finance cost of Rs. 758649615/- have been incurred for the purpose of purchase of shares of Hero MotoCorp. 4. If it is held that "Capital Gain" shown by the company is "Business Income" then the expenditure incurred may be allowed. Reference be made to the order of Hon'ble ITAT Chandigarh Bench in the case of ACIT Vs. Gaurav Munjal in ITA No.740/2012 dated 31.10.2012 for AY 2008-09 where a disallowance of Rs. 5000/- was restricted out of total expenditure of Rs. 1279001/- i.e. 0.03%. Ground No.3 That the Ld.ACIT has wrongly calculated and determined the disallowance u/s 14A at Rs. 95,26,10,119/-. 1. The Ld. AO has calculated and determined the disallowance of Rs. 952610119/- u/s 14A by applying Rule 8D in case the income of assessee is continuing to be treated under the head "Capital Gains", no disallowance u/s 14A is called for, as the assessee has not claimed any expenditure in the return. 2. However in case the profit on sale of investment is treated as "Business Income" and the expenditure of Rs. 782520175/- debited in the P&L Account is allowe....
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....er requirement of Companies Act at Rs. 20,73,82,387/-. This amount was debited to Profit & Loss Account & accordingly the cost of shares were reduced. The company had not claimed nor allowed the diminution in the value of shares as expenditure in AY 2007-08. The provisions of Section 43 of Income Tax Act read as under: "In sections 28 to 41 and in this section, unless the context otherwise requires- (I) "actual cost" means the actual cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly be any other person or authority." Since in this case, no portion of actual cost of shares has been met directly or indirectly by any other person or authority, therefore, the provisions made for diminution in value of shares will not be reduced from the "actual cost" for the purpose of determination of business profit as mentioned in section 43 of Income Tax Act. A chart showing the calculation of profit/loss on sale of shares without considering the diminution in value of shares for computing the income under the head "Business Income" is enclosed. It is, therefo....
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....r such circumstances and keeping in view the guidelines issued by the CBDT vide Circular No. 6 dated 29.02.2016, the action of the Assessing Officer in treating income from the sale and purchase of shares/securities/PMS/mutual funds etc. as business income instead of long term capital gains is negated. The Assessing Officer is, therefore, directed to treat the income from sale and purchase of shares/securities/PMS/Mutual Funds etc. as income of the assessee company under the head "Capital Gains". In the result, the grounds NO.2 and 2(b) of appeal taken by the assessee company is allowed. 6.4 The alternative ground taken by the assessee is rejected as the same has become infructuous in view of the fact that the income from sale and purchase of shares/mutual funds/PMS etc. has been directed to be treated as long/short term capital gains. 7. As the income from the purchase and sale of shares/securities has been directed to be treated as income under the head 'capital gains', the ground 3 of appeal taken by the assessee company have become infructuous. Accordingly, the ground No. 3 of appeal taken by the assessee company is dismissed. 8. The ground No. 4 of a....
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.... is dismissed. Order pronounced in the open court on 13.10.2023 ============= Document 1 Particulars Interest on deposits with bank Interest on income tax refund Amount (Rs.) 55528621 765390 Dividend income (exempt) 9370812964 Long Term Capital Loss (635853685) Total 56294011 Document 2Particulars Amount Business Income 40000004 Income From Other Sources 56294011 Total 96294015 Document 3 Investments Purchase Sale Date date No. of LTCG/LTCL days Munjal Acme Packaging Systems (P) Ltd 4/1/2003 13/4/2011 2290 222952 Munjal Acme Packaging Systems (P) Ltd 31/3/2007 13/4/2011 1474 64066 Munjal Acme Packaging Systems (P) Ltd 1999-2000 13/4/2011 1474 127249 Hero Corporate Service Ltd 1474 262499568 1/3/2007 3/4/2011 Hero Corporate Service Ltd 1661 1893912 5/9/2006 3/4/2011 Hero Corporate Service Ltd 3301 3864831 0/3/2002 3/4/2011 Hero Corporate Service Ltd 2583 34995358 7/3/2004 3/4/2011 Hero Management Service Ltd 3301 11604779 0/3/2002 3/4/2011 Hero Management Service Ltd 2583 78023218 7/3/2004 3/4/2011 Hero Managemen....