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2017 (4) TMI 1351 - ITAT MUMBAINature of income - Long Term Capital Gains or busniss income - share transactions - period of holding - Held that:- There is no dispute on the fact that the shares in question are undisputedly long term capital assets within the meaning of section 2(29)(b) r.w.s 2(29)(a) and 2(42)(a) (b) of the Act. The period of holding constitutes the determining factor conclusively so far as the said definitions relating to the short term and long term capital loss and the short term and long term capital gains. Considering the above CBDT Circular as well as the precedents in the matter, we are of the opinion, the order of the CIT (A) on this issue of LTCG is fair and reasonable and it does not call for any interference. Accordingly, we affirm the view of the CIT (A). Short term capital gain - STCG should be treated as business income of the assessee - Held that:- The view of the AO in treating the LTCG and STCG as business income of the assessee, is not proper. Considering statutory provisions regarding the definition of LTCG, we are convinced that the views of CIT (A) are sustainable. Similarly, regarding the claim of STCG also, we find that (i) the consistency principles; (ii) use of own funds of ₹ 54 Crs; (iii) earning of gross dividend income of ₹ 1.20 Crs or ₹ 30 lakhs on account of short term capital assets; (iv) details given in the contract notes regarding intention of certain shares in physical form etc., suggest that the STCG in question cannot be held as business income. Addition u/s 14A - Held that:- Applying the provisions of Rule 8D(2) of the Rules creates a absurdity to the facts of the present case. Considering the same, in our view, as fairly mentioned by the Ld Counsel for the assessee, disallowing 2%, taking spirit from the said judgment of the Bombay High Court in the case of Godrej Agrovet [2014 (8) TMI 457 - BOMBAY HIGH COURT ] should meet the ends of justice. Accordingly we order and direct the Assessing Officer to restrict the disallowance to 2% of the exempt income.
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