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2016 (3) TMI 978 - AT - Income TaxDisallowance u/s 14A of the Act read with Rule 8D(2)(ii) and (iii) of the Rules - Held that:- The relevant assessment year under appeal is 2005-06 at which point of time, the provisions of Rule 8D was not in force and the same was made applicable only from Asst Year 2008-09 as decided in the decision of Godrej & Boyce Manufacturing [2010 (8) TMI 77 - BOMBAY HIGH COURT ]. However, it is not in dispute that the assessee had derived taxable income as well as tax free income and incurred expenditure for deriving both the incomes and hence disallowance is definitely warranted in terms of section 14A which is brought in the statute book with retrospective effect from 1.4.1962. The disallowance had to be made only on an estimated basis with regard to the expenditure incurred for the purpose of earning tax free income. Thus we direct the Learned AO to disallow 1% of exempt income under this issue - Decided partly in favour of assessee Transactions of frequent purchase and sale of shares in a systematic and organized manner - assessed as capital gains OR business income - Held that:- There is no material brought in by the revenue to show that separate accounts of two portfolios are only a smokescreen and there is no real distinction between two types of holdings. This could have been done by showing that there is intermingling of shares and transactions and the distinction sought to be created between two types of portfolios is not real but only artificial and arbitrary. Therefore, in absence of any material to the contrary, and on appreciation of cumulative effect of several factors present as culled out above , we hold that the surplus is chargeable to capital gains only and assessee is not to be treated as trader in respect of sale and purchase of shares in investment portfolio - Decided against revenue
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