TMI Blog2013 (11) TMI 977X X X X Extracts X X X X X X X X Extracts X X X X ..... ost or market price, whichever is less' - The fact that the mistake in disclosing these shares as "Stock-in-trade" was rectified by way of the Board's resolution also substantiates the claim that these shares were in fact held as "Investment" - Nomenclature of a transaction is not relevant. It is the real character of the transaction which is looked into - The facts and circumstances of the case should be considered - The period of holding of more than two years and the valuation of such shares at cost price in the earlier balance-sheet shows that the shares were in fact held as "Investment". Once the shares are held as `Investment, any profit or loss from their transfer has to be considered under the head `Capital gains' and not as `Business income' – Decided against Revenue. Disallowance u/s 14A – Held that:- Following Dhanuka & Sons VS. CIT [2011 (4) TMI 861 - CALCUTTA HIGH COURT] - Disallowance u/s 14A is attracted even when the securities fetching exempt income are held as stock in trade. Following Godrej & Boyce Mfg. Co. Ltd. VS. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Rule 8D of the IT Rule, 1962 is applicable from AY 2008-09 - The disallowance u/s. 14A of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) Seal Enterpreneurs Pvt. Ltd. 02.03.1995 37,50,000/- ii) Bhavnani Developers 07.01.1997 25,00,000/- iii) Deepti Promoters Pvt Ltd. 15.01.1997 5,00,000/- iv) Gourisut Developers Pvt Ltd. 20.01.1997 3,00,000/- v) Shruti Estate Pvt Ltd. 25.07.11996 10,00,000/- vi) Prasad Madhukar Sonabane 20.09.1996 4,50,000- 3. In order to prove the entering of the assessee into the business of real estate, it was demonstrated that its Memorandum of association also contained an object clause in this regard. The Assessing Officer observed that the assessee was earlier engaged in the trading of suiting shirting and thereafter, it started trading in shares and securities. According to the Assessing Officer, the assessee was not engaged in the business of purchase and sale of land. Unconvinced with the assessee's submissions, he came to hold that the said amount of Rs.15 lakh was not bad debt as the same was not incidental to the assessee's business. No relief was allowed in the first appeal. 4. We have heard the rival submission and perused the relevant material on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s' refers to a series of transactions done with the object of earning profit on regular basis. We are also agreeable with the contention of the ld. AR that a single business transaction can be considered as "adventure in the nature of trade". However, it is of utmost importance that the facts must prove that such an isolated transaction was, in fact, entered into with the object of doing "business". In so far as the facts of the present case are concerned, we are fully convinced that the assessee miserably failed to prove that the present transaction was in the nature of a `business transaction'. It is so for the reason that the amount of Rs.37.50 lakh given as advance was never given with the intention of doing any business in "real estate". The assessee never intended to carry on such business of real estate as is revealed from page-13 of the Paper Book which is later of M/s. ZEPL to the assessee dated 10-05-2000 reading that: "It was agreed that you would not purchase the land and the land would be developed by our company and our company will refund the sum of Rs.37.50 lakh to you." These facts amply prove that the assessee never intended to carry on such a business. On a perti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd resolution on 01- 04-2005 rectifying the hitherto mistake by converting it into "Investment". Not convinced with the assessee's submissions, the Assessing Officer treated this amount as "Business income" as against the assessee's claim of `Capital gains'. The Ld. CIT(A) got convinced with the assessee's submissions and restored the assessee's point of view. 8. After considering the rival contentions and perusing the relevant material on record, it is observed that the shares of IGFL were acquired during the financial year 2003-04. Such shares were retained as such only throughout the period before their sale in two lots in the previous year relevant to the assessment year under consideration. It shows that such shares were held by the assessee for a period of more than two years and further no other transactions of purchase and sale of these shares was undertaken by the assessee during such period. Though inadvertently these shares were disclosed as "Stock-in-trade" but these were actually held as "Investment" throughout the period as is evident from the fact that the assessee continued to value such shares at cost price in the respective balance-sheets from the date of purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s batch of cases, it has been mentioned at the beginning of the judgment that the securities were held by these banks as `Business asset' (not `Investment'). After considering the judgment of the Hon'ble Supreme Court in CIT VS. Walfort Share Stock Brokers (P) Ltd. (2010) 326 ITR 1 (SC), the Hon'ble High Court sustained the disallowance of the expenses. Similar view was expressed by the special bench of the Tribunal in ITO VS. Daga Capital Management Pvt. Ltd (2008) 119 TTJ (SB)(Mum) 289. In view of the above position emanating from various judgments as discussed above, including that of the Hon'ble jurisdictional High Court, we find no force in the contention urged on behalf of the assessee that no disallowance of expenses u/s 14A can be made when the shares are held as stock in trade. 11. Now we come to the question of quantum of disallowance. The assessment year under consideration is 2006-07. Rule 8D of the IT Rule, 1962 is applicable from AY 2008-09 as has been held by the Hon'ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. VS. DCIT (2010) 328 ITR 81 (Bom) and Hon'ble Delhi High Court in the case of Maxopp Investment Ltd. VS. CIT (2012) 347 ITR 272 (Del). ..... X X X X Extracts X X X X X X X X Extracts X X X X
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