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2007 (10) TMI 461 - AT - Income TaxSale of units of debt-oriented mutual funds - Taxability under the head "Business Income or Capital Gain" - Taxability of Interest income (earned on deposits) - Levy of interest u/s 234C is mandatory under the Act? Sale of units of debt-oriented mutual funds - Taxability under the head "Business Income or Capital Gain" - 33 transactions of high magnitude - buying and selling done in 8 months out of 12 months in the present year - earlier year, same activity was accepted by the Department as investment activity and income/loss therefrom was assessed under the head capital gain - HELD THAT:- Since, facts in the present case are similar to the facts in the case of Janak S. Rangwalla [2006 (12) TMI 261 - ITAT MUMBAI], we decide this issue in favour of the assessee by respectfully following this Tribunal judgment and the judgment of the Hon’ble Apex Court relied upon by the learned counsel. Regarding the contention of the ld DR of the Revenue that entries in books are not conclusive, we would like to mention that there is no dispute on this count. It is a settled legal position by now that entries in books are not conclusive but there should be a firm basis to take a different view from entries in books of account. In the present case, the Assessing Officer has taken a different view contrary to books of account on the basis of magnitude and number of transactions without bringing anything else on record that purchases of units of mutual fund were made on account of dealing in shares and not on account of investments. We, therefore, are of the considered opinion that in the present case, the income on sale of units of mutual funds has to be assessed as capital gain as declared by assessee and set off of brought forward capital loss has to be allowed against long-term capital gain as claimed by the assessee in return of income. This ground of the assessee is allowed. Taxability of Interest income (earned on deposits) - Principle of Mutuality - HELD THAT:- We find that this issue is covered in favour of the assessee by the Tribunal judgment rendered in the case of Shivolika Co-operative Group Housing Society Ltd.[2006 (6) TMI 142 - ITAT DELHI] relied upon by the learned counsel for the assessee. In that case, issue involved was with regard to interest income of the assessee on fixed deposit with bank. It is observed by the Tribunal in that case that the interest income earned by the assessee was on surplus fund of society deposited with bank and hence same is covered by the principle of mutuality as held in the case of Director of IT (Exemptions) Oriental Bank [2003 (1) TMI 704 - DELHI HIGH COURT]. Since, facts in the present case are similar, we decide this issue in favour of the assessee by respectfully following this judgment of Hon’ble Delhi High Court and this Tribunal judgment. This ground of the assessee is allowed. Levy of interest u/s 234C - HELD THAT:- We are of the considered opinion that it is a settled issue that interest u/s 234C is mandatory but we find force in the submission of the learned counsel of the assessee that interest u/s 234C has to be calculated on the basis of returned income because we find that in section 234C, the reference to the difference regarding payment of advance tax is made as compared to tax payable on, returned income and advance tax paid by the assessee. We, therefore, direct the Assessing Officer that interest u/s 234C should be charged on the basis of returned income as provided u/s 234C. The Assessing Officer should pass necessary order as per law after providing adequate opportunity of being heard to the assessee. This ground of the assessee is allowed. In the result, the appeal filed by the assessee is allowed.
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