TMI Blog2012 (5) TMI 335X X X X Extracts X X X X X X X X Extracts X X X X ..... Member 1. Appeal by revenue and Cross Objection by assessee are arising out of order of CIT(A)- XII, Kolkata in Appeal No. 950/XII/Cir-12/09-10 dated 25.05.2010. Assessment was framed by DCIT, Circle-12, Kolkata for Assessment Year 2007-08 u/s. 143(3) Income Tax Act, 1961(hereinafter referred to as "the Act") vide his order dated 31.12.2009. 2. First issue in this appeal of revenue is against the order of CIT(A) in holding that business income assessed by AO is to be assessed as capital gains without any evidence that Business of assessee was capital in nature. For this, revenue has raised the following ground No.1: "1.That, on the facts and circumstances of the case, Ld. CIT(A) erred in treating the business income of Rs.1,37,33,138/- as capital gain without showing any proof that the Business was capital in nature." 3. We have heard rival submissions and gone through facts and circumstances of the cases. The brief facts leading to the above issue are that assessee is engaged in the business of loans and finance, filed its return of income showing total income of Rs.31,36,825/- on 29.10.2007. Apart from dividend income of Rs.40,34,288/-, assessee company has shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing the ratio laid down by the ITAT, Kolkata Bench in the case of Reliance Enterprises Ltd. and the ratio laid down in the cases discussed, I hold the gains on account of sale of shares/units shall be treated as capital gains as against business income assessed by the A.O. Accordingly I direct the A.O to treat the gains as capital gains' instead of business income" My aforesaid appellate order in appellant's own case for A.Y. 2005-06 on the issue of treatment of surplus on sale/redemption of shares/units was upheld by Hon'ble TAT by its order 17.08.2009 in ITA No. 837/Kol/2009. The operative part of said order of TAT on the issue related to ground no. 1 here is reproduced below: 15. Considering the cases cited (supra) and the facts of the case before us, we are of the considered view that the ld. CIT(A) has rightly held that the assessee has treated the shares/units as in vestment and not stock-in-trade, as is evident from the entries made in the books of accounts and balance sheet. The Department has also accepted the above contention of the assessee even in earlier assessment years. The Department in the scrutiny assessments under section 143(3) of the Act for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the case, the Ld. CIT(A) erred in upholding the adoption of Rule 8D of the Income Tax Rules, 1962 by Ld. Assessing Officer for making disallowance u/s. 14A of the Income tax Act, 1961. Alternatively and without prejudice to ground no.1: Alt. 1. For that on the facts and in the circumstances of the case, the Ld. CIT9A) erred in upholding the application of Rule 8D(2)(ii) by the Ld. A/O to interest paid amounting to Rs.3,15,000/-. Alt. 2. For that on the facts and in the circumstances of the case, the Ld. CiT(A) erred in upholding the action of Ld. Assessing Officer in including the average value of even those investments which did not produce any exempted income during the year while computing 'average value of investments income from which does not form part of total income', for the purposes of Rule 8D(2)(ii) and (iii)." 6. We have heard rival submissions and gone through facts and circumstances of case. We find that during the course of assessment proceedings, Assessing Officer noticed that the assessee company had shown a dividend of Rs.40,34,288/- and no proportionate expenses attributable to the exempted income was added back by assessee. Accordingly, Rs.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e.f. assessment year 2007-08, wherein Hon'ble High Court has also directed to recompute disallowance in case there is a nexus for expenses with exempt income by laying down the principle as under: "(v) The provisions of rule 8D of the Income-tax Rules which have been notified with effect from March 24, 2008, shall apply with effect from the assessment year 2008-09; (vi)Even prior to the assessment year 2008-09, when rule 8D was not applicable, the Assessing Officer has to enforce the provisions of sub-section (1) of Section 14A. For that purpose, the Assessing Officer is duty bound to determine the expenditure which has been incurred in relation to income which does not form part of the total income under the Act. The Assessing Officer must adopt a reasonable basis or method consistent with all the relevant facts and circumstances after furnishing a reasonable opportunity to the assessee to place all germane material on the record; (vii) The proceedings for the assessment year 2002-03 shall stand remanded back to the Assessing Officer. The Assessing Officer shall determine as to whether the assessee has incurred any expenditure (direct or indirect) in relation to divid ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
