TMI Blog2013 (4) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidering the totality of the aforesaid facts the systematic activity of purchase and sale of shares, making application in IPOs directly as well as through relatives and on allotment selling them, the volume and frequency of transaction do not appear to be an investment activity but on the contrary appears to be business activity - therefore view that the action of A.O. in treating the activity of purchase and sale of shares as business activity cannot be faulted and therefore the profit and sale of shares were rightly treated by him as business income - against assessee. Dis allowance of depreciation - Held that:- The undisputed fact is that the assessee is in the business of oxygen gas since A.Y. 2000-01, there was no business activity of oxygen gas during the year in appeal. The submission of the assessee that the electricity connection was surrendered in January,2006 and till Dec.,2005 the assessee was having electricity connection and no business activity during the year was on account of business conditions has not been controverted by Revenue by bringing any contrary material on record. It is also not in dispute that in earlier year the assessee has been allowed depreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... And Shri Anil Chaturvedi, A.M.,JJ. Mr. Sanjay R. Shah. Mr. Rahulkumar Sr.D.R. ORDER Out of these appeals one is filed by the assessee and the other filed by the Revenue against two different orders of CIT (A)-XX, Ahmedabad dated 5-5-2009 dated 31-12-2009 and the assessee has filed Cross objection against the appeal filed by the Revenue for the assessment year 2006-07. 2. Facts culled out from the orders of the lower authorities are as under. 3. Assessee is an individual doing trading in marine machinery parts under the name of "Prelude Engg." and also engaged in equity Future Options (F O) and commodity transactions in personal capacity. He filed his return of income on 16-11-2006 declaring total income of Rs.12,98,210/-. The case was selected for scrutiny and thereafter the assessment was framed u/s. 143(3) vide order dated 23-12-2008 and the income was determined at Rs.29,34,590/-.Aggrieved by the order of A.O., assessee carried the matter before CIT (A). CIT (A) vide order dated 5-5- 2009 dismissed the appeal of assessee. Against the aforesaid order of CIT (A), assessee has filed the present appeal (ITA No.2240/Ahd/2009). The grounds raised by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scrips purchased were sold and there was no stock at the end of the year. In the notes forming part of accounts it was stated that assessee had carried on business of shares and securities. A.O. also noted that assessee had made application in various IPOs through various individual names and the shares allotted were immediately sold on allotment. A.O. also noticed that assessee had done trading in commodities and F O transactions. Assessee's submission that the transaction of purchase and sale of shares have been done with the intention of investments and therefore the profits earned by him were in the nature of capital gains was not accepted by the A.O. He treated the activity of purchase and sale of shares as business activity and accordingly the profit on sale of shares amounting to Rs.6,89,223/- was treated as business income. Aggrieved by the order of Assessing Officer, assessee carried the matter before CIT (A). CIT (A) upheld the order of A.O. by holding as under:- "3.3. I have carefully considered the contentions of the Ld. Counsel for the appellant with judicial pronouncements relied upon by him and have also carefully gone through the assessment order. It is seen that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... numerous transactions of purchase and sale of shares. The list of transactions which run into 8 pages are listed as Annexure to the assessment order. The A.O. has given a finding that the assessee has done transactions through 3 brokers, assessee has dealt in numerous scrips, holding period of shares is very less, the scrips that were purchased have been sold during the year itself. The assessee has also done trading in commodity transactions, derivates and futures and options. A.O. has also observed that assessee had advanced money to relatives and friends who in turn applied for shares in IPOs in their names. On allotment of shares, the shares were transferred by the friends and relatives to the demat account of the assessee and the same were sold immediately by the assessee. In case the shares were not allotted in IPO the friends and relatives refunded the money back to the assessee. These facts could not be controverted by the Ld. A.R. by bringing any contrary material on record. Considering the totality of the aforesaid facts the systematic activity of purchase and sale of shares, making application in IPOs directly as well as through relatives and on allotment selling them, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as since A.Y. 2000-01.Due to non availability of business in the year under appeal no activity of oxygen business was carried out but however the assessee has kept the machinery ready for use. He further submitted that it is not a case of permanent closure of business activity but a case of temporary stoppage due to market conditions. He further submitted that the electricity connection was surrendered in January, 2006 and therefore upto December, 2005 the electricity connection continued and the machinery were kept ready for use. He further submitted that instead of electricity the assessee had used DG set as an alternate source of power. He further submitted that in the block of assets, it is not permissible to allow depreciation on partial block. He thus urged that the disallowance made by A.O. be deleted. He also relied on the decision of Delhi High Court in the case of CIT vs. Oswal Agro Mills Ltd. (2021) 341 ITR 467 (Del.) and also placed the copy of the decision on record. The Ld. D.R. on the other hand relied on the order of A.O. and CIT (A). 13. We have heard the rival submissions and perused the material on record. The undisputed fact is that the assessee is in the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would result in short-term capital gains, which would be exigible to tax." 15. In view of the totality of aforesaid facts and seen in the light of ratio of aforesaid decision laid down by Hon'ble Delhi High Court and relying on the aforesaid decision of Delhi High Court, we are of view that assessee is entitled to depreciation. Thus this ground of assessee is allowed. Since we have allowed No.3.1, ground No.3.2 does not survive. Ground No.4 is with respect to disallowance u/s.14A. 16. A.O. observed that assessee has earned share dividend (Rs.8,850/-) and dividend from mutual fund (Rs.61,393/-) which are exempt u/s. 10. A.O. was of the view that provisions of Sec. 14A are applicable and therefore, the expenditure incurred for earning exempt income has to be disallowed. Though the assessee submitted that he had not incurred any expenditure to earn exempt income, A.O. worked out the disallowance of Rs.1,47,509/- u/s. 14A by following the Special Bench decision in the case of Daga Capital (ITA No.8057/Mum/03). Aggrieved by the order of A.O., assessee carried the matter before CIT (A). CIT (A) dismissed the ground of assessee by holding as under:- "7.3. I have carefully gone th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able, the A.O. had to enforce the provisions of sub-section (1) of section14A. For that purpose, the A.O. 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 A.O. 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. The proceedings for A.Y. 2002-03 would stand remanded to the A.O. The A.O. should determine as to whether the assessee had incurred any expenditure (direct or indirect) in relation to dividend income/ income from mutual funds which does not form part of the total income as contemplated under sec. 14A. The Assessing Officer can adopt a reasonable basis for effecting the apportionment. While making that determination, the Assessing Officer should provide a reasonable opportunity to the assessee of producing its accounts and relevant or germane material having a bearing on the facts and circumstances of the case." 21. Following the ratio laid down in the aforesaid decision in the case of Godrej Boyce Mfg. Co. Ltd. (supra) whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly dispute which exists in this case is whether the appellant had repaid the loan of Rs.1,67,70,000/- otherwise than by an account payee cheque or bank draft to Wirana Pvt. Ltd. In the assessment order, the Assessing Officer has stated that the loan taken from Wirana Pvt. Ltd. is adjusted against sale of shares of M/s. R. L. Kalathia Ship Breaking Pvt. Ltd. which clarifies that there is no repayment of loan in cash. The amounts of advances even if taken as loan have been adjusted by selling of 98000 shares of R. L. Kalathiya Ship Breaking Pvt. Ltd. Here, in the instant case, even if we assume that book adjustment as carried out by the taxpayer is a deposit or loan, there being no transfer of money, it cannot be said that such deposit or loan comes within the purview of Section 269T of the Act. For violation of section 269T of the Act, it is necessary that there should be transfer of money, which is not in the instant case. This view is supported by the Ld. ITAT Ahmedabad Bench C decision in the case of M/s. Shelter Inn Hotel Pvt. Ltd. relied upon by the Ld. Counsel. In this case, the Ld. ITAT has upheld the order of CIT(A) and cancelled the penalty levied by the Assessing Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to tax and the same was accepted by the Revenue and thus the genuineness of the transaction was not in doubt. He has further held that the amount of advances even if taken as loan have been adjusted by selling of shares and since there was no transfer of money, it cannot be said that such deposit or loan comes within the purview of Sec.269T of the Act. The revenue could not controvert the submission of assessee that the disclosure made in the Balance Sheet was contrary to the provisions of Companies Act, 1956. 28. In the case of CIT vs. Saini Medical Stores (supra) the Hon'ble High Court confirmed the deletion of penalty when there was no doubt about the genuineness of transactions which have been fully accepted in the assessment made and when no tax evasion of tax avoidance was involved and when the default was of technical or venial nature. 29. CIT (A) while deleting the addition has held that genuineness of the transaction has not been doubted by Revenue, the amount has been treated as income, during the course of assessment and penalty proceedings, all the required details have been submitted by assessee there was no transfer of money and does not come within the purview ..... X X X X Extracts X X X X X X X X Extracts X X X X
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