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2016 (6) TMI 483 - ITAT KOLKATAAssessment of income - capital gain v/s business income - Held that:- To clarify the position the CBDT had come out with a Circular No.6/2016. We are of the view that the above Circular should settle the controversy in favour of the Assessee, in the facts and circumstances of the case of the Assessee. We have already observed that the Assessee has been consistently maintaining two portfolio of shares one held as investments and the other held as stock-in-trade of business of dealing in shares. As far as the income on sale of shares held as investments is concerned, the Assessee has always been declaring such income under the head “Capital Gain” and the same has been accepted by the revenue in the past assessments. - Decided against revenue Transaction of shares - whether the STCG on transaction of purchase and sale of shares undertaken by the assessee during the previous year is to be assessed under the head ‘income from business’ as claimed by the revenue or income under the head ‘capital gain’ as contended by the assessee? - Held that:- The income in question has to be assessed under the head “Short Term Capital Gain” as declared by the Assessee Disallowance u/s 14A - Held that:- As far as disallowance of interest expenses under Rule 8D(2)(ii) of the Rules is concerned, we agree with the submission of the Assessee that the Assessee had own funds out of which it can be said that investments were made and therefore no disallowance of interest expenses ought to have been made. A perusal of Balance sheet of the Assessee as on 31.3.2008 will show that the Assessee had own funds of 34.84 Crores and investment were acquired at cost of ₹ 27.97 Crores. Therefore the disallowance of interest expenses of ₹ 16,04,669/- is directed to be deleted. As far as disallowance of other expenses under Rule 8D(2)(iii) of the Rules i.e., disallowance of other expenses is concerned income earned from investments and short term capital gains (against which no expenses have been shown) is almost 5 times from the business income against which all the establishment and other expenses have been claimed. The Assessee had not claimed any expenditure even on short term capital gain which would have reduced income chargeable at the rate of 10% and increased the business income chargeable at maximum marginal rate of 30%. It cannot therefore be said that the revenue authorities were not justified in disregarding the disallowance made by the Assessee on its own by pointing out specific infirmity in the Assessee’s working of the amount disallowable under Section 14A of the Act. Keeping in mind the above findings of the CIT(A), we are of the view that the disallowance of other expenses as sustained by the CIT(A) of ₹ 11,42,424 under rule 8D(2)(iii) of the Rules is proper and calls for no interference. We however clarify that the amount already disallowed by the Assessee in the computation of total income should again not be added. In other words, the disallowance u/s.14A of the Act shall be only ₹ 11,42,424/-. - Decided partly in favour of assessee
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