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2015 (10) TMI 750 - HC - Income TaxGains from the purchase and sale of shares and mutual funds - treated as Long Term Capital gains or business income - Held that:- Twin test applied by the Assessing Officer and the CIT (A) to hold that the respondent-assessee is a trader in shares and mutual funds is not correct. As pointed out above, as per CBDT circular No.4/2007 dated 15 June 2007 it is open to the respondent-assessee to hold the securities in two portfolios i.e. one investment portfolio and another trading portfolio. There is no bar under the Act which prevents the assessee from investing partly as investment and partly for trading in the same scrip. Besides, the second test namely that it is at the sole discretion of the respondent to determine whether a particular scrip is to be treated as an investment or a scrip in which he trades, is permissible in terms of the Circular No.4/2007 dated 15 June 2007. It is for the respondent assessee to determine how he seeks to treat a particular scrip i.e. as an investment or for trading. This intent would only be reflected in maintaining different accounts for the two. There is no allegations of shifting of scrips from trading to investment or vice versa. Moreover, it is also pertinent to note that the respondent – assessee had shown all its scrips treated as investments at cost, while those held as stock-in-trade were shown at cost or market value whichever is low. This again is an indication of the fact that the respondent – assessee held the scrips offered for tax under the head 'long term capital gains' as investment. Further Assessee submission that so far as the long term capital account is concerned, even during the preceding assessment year, the percentage of tax charged on it was lower than that taxed on business income is not disputed by Revenue. Therefore, the issue arising in this Assessment Year should also have been a subject of enquiry in the assessment order passed in respect of preceding assessment year. Therefore, even on the principle of consistency no fault can be found with the impugned order. For the above reasons, we are of the view that the view of the Tribunal is a reasonable and possible view. Gains treated as Long Term Capital gains - Decided in favour of assessee. Disallowance under Section 14A r.w.r 8D - ITAT deleted the addition relying on case of Godrej & Boyce Mfg. Co.Ltd., [2010 (8) TMI 77 - BOMBAY HIGH COURT] wherein it is held that Rule 8D is prospective and applicable only from the AY 2008-09 - Held that:- The impugned order of the Tribunal has, merely followed the binding decision of this Court in 'Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT [suora] - Thus, Question does not raise any substantial question of law and, therefore, not entertained. - Decided in favour of assessee.
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