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2016 (9) TMI 652 - AT - Income TaxSale of shares and securities held as ‘investment’ - short term capital gains or income from business - Dual portfolio - 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 the distinction sought to be created between two types of portfolios is not real but only artificial and arbitrary. In the instant case, the ld AO himself admits that the assessee maintains two separate portfolios in the year under appeal and also in the earlier years. The books of accounts of the assessee also support the same. The books of accounts of the assessee were not rejected by the ld AO and the stand of the assessee in offering long term capital gains under investment portfolio is not disputed by the revenue. 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 net surplus on sale of shares under investment portfolio should be 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. Disallowance u/s 14A - Held that:- As decided in assessee’s own case in Asst Year 2005-06 as observed that in the relevant year under consideration i.e. A.Y. 2005-06, Rule 8D was not applicable and, therefore, the disallowance under section 14A on account of expenditure incurred by the assessee in relation to the exempt income is required to be made on some reasonable basis. In this regard, this Tribunal has taken a consistent view that the disallowance under section 14A on account of expenses incurred in relation to the income at 1% of such exempt income would be fair and reasonable. Following this consistent stand taken by the Tribunal, we restrict the disallowance under section 14A to the extent of 1% of the exempt income in the form of dividend and long-term capital gain
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