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2018 (10) TMI 1179 - AT - Income TaxRedemption of units of mutual funds - capital gain or business income - period of holding - number of transactions - Held that:- Here it is not a case where the mutual funds have been rotated again and again to purchase and sell the same which is a typical feature in a business, albeit here in this case as pointed out earlier, only 15 transactions have been undertaken for redemption of mutual funds and investment in the same mutual funds have not been made and redeemed again and again. The purchase of mutual funds has been classified as ‘investment’ in the books of account and in the balance sheets and such a treatment is continuing in the subsequent periods also and at no point of time, they have been treated as ‘stock in trade’ in the books of accounts. Thus, the intention of the assessee right from the day one was to make investment in the form of mutual fund and not for the trading. This is also fortified by the fact that no borrowed funds have been utilised in such an investment. The computation and the details of short-term capital shows that mutual funds were held and redeemed mainly on maturity date which again indicates that the intention for purchase of mutual funds was only for the purpose of investment and held for benefits accruing thereon. Further on perusal of the profit and loss account it is seen that there is no expenditure debited which can be said to be incidental for the business purpose. Though here in this case redemption of mutual funds are for a period less than 12 months, but it is quite clear from the CBDT circular that intention of the assessee and the treatment given by the assessee in the books has been given paramount importance. CIT (A) has rightly held that redemption of units of mutual funds is to be taxed as capital gains and not as business. - Decided against revenue. Deemed dividend addition u/s 2(22)(e) - CIT(A) has deleted the said deemed dividend in the hands of the assessee firm on the ground that firstly, such a capital contribution is not a loan or advance, because no one gets right to share the profit of the firm merely by giving loan and advance; and secondly, the assessee firm not being the registered or beneficial shareholders in these two companies, therefore, provision of deemed dividend cannot be attracted - Held that:- Such a conclusion of CIT-A is based on well settled proposition of law, therefore, same is affirmed. However, CIT(A) has given direction to the AO to examine the issue of deemed dividend in the hands of individual persons. In so far as the direction of the Ld. CIT(A) to delete the addition of deemed dividend in the hands of the firm the same is affirmed, but in so far as direction given to the AO, we are not interfering in such a direction, because that issue if at all could be examined if only any such action is taken in the hands of the individuals and not otherwise. Accordingly, the grounds raised by the revenue on this score are dismissed.
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