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TMI Blog2014 (5) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... in law in confirming the action of the Assessing Officer in making disallowance under section 14A of the Act as per Rule 8D of the Income Tax Rules. 2. Without prejudice, that the Commissioner of Income tax (A) erred on facts and in law in not appreciating the disallowance under section 14A of the Act was not correctly computed by the Assessing Officer as per Rule 8D of the Income Tax Rules." 3. We have heard the arguments of both the sides and perused relevant material placed before us. After considering the arguments of both the sides, we find this issue to be covered by the decision of Hon'ble Jurisdictional High Court in the case of Maxopp Investment Ltd. Vs. CIT - [2012] 347 ITR 272 (Delhi). Respectfully following the same, we set aside the orders of authorities below on this point and restore the matter to the file of the Assessing Officer. We direct him to readjudicate the issue afresh as per the direction of Hon'ble Jurisdictional High Court in the case of Maxopp Investment Ltd. (supra). Needless to mention that Assessing Officer will allow adequate opportunity of being heard to the assessee. 4. Ground No.3 of the assessee's appeal reads as under:- "3. That the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of M/s Express Securities Pvt. Ltd. vide order dated 22nd October, 2013 in Income Tax Appeal No.406/2013. In the said case, under identical facts, the conversion of stock-in-trade to the head 'investment' was upheld by the ITAT and Hon'ble Jurisdictional High Court dismissed the Revenue's appeal. He further pointed out that the Assessing Officer wrongly held that the intention of the assessee was to act as a trader as in the past. He submitted that after the conversion of stock-in-trade as investment, the intention of the assessee is to hold the investment and realize the investment. He also stated that the volumes of purchase and sale transactions are not high and the same are only in a few scripts. Learned counsel relied upon the decision of Hon'ble Bombay High Court in the case of Gopal Purohit wherein the Revenue's SLP was rejected by Hon'ble Apex Court. He also referred to the decision of Hon'ble Jurisdictional High Court in the case of Rohit Anand vide ITA No.1135/2010 and CIT Vs. Avinash Jain - [2014] 362 ITR 441 (Delhi). 6. Learned DR, on the other hand, relied upon the orders of authorities below and he stated that in the preceding year, the conversion of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company was maintaining two sets of portfolio, i.e., investment and trading portfolio. The Assessing Officer did not accept the long term capital gain on the ground that the assessee was a share broker with the Bombay, Delhi and Calcutta Stock Exchange. He also observed that conversion of stock-in-trade into investment was done with the intention not to pay tax as Section 10(38) was introduced by the Finance Act, 2004 with effect from 1.4.2005. Accordingly, he held that the entire amount was taxable as trading receipt and not under the head capital gain. The CIT(A) accepted the assessee's contention which is further upheld by the ITAT. The Revenue filed the appeal before Hon'ble Jurisdictional High Court which, vide order dated 22nd October, 2013, dismissed the Revenue's appeal. Their Lordships in paragraph 4 of the order held as under:- "Mere fact that Section 10(38) was introduced in the statute by Finance Act 2004 with effect from 1st April, 2005, does not mean that the said conversion was improper or illegal. After the said Section was inserted, the assessee on noticing the tax benefit, was entitled to convert and change his holding from stock in trade into invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the sole intention of the assessee was to resale the shares at a profit. Therefore, the transaction is an adventure in the nature of trade. We are of the opinion that the Assessing Officer has not rightly appreciated the facts of the case. In this case, till 30th September, 2004, all the purchases of shares were certainly made with the intention of trading and in the books of account also, the assessee has recorded the shares as stockin- trade. However, as on 30th September, 2004, the assessee converted the stock-in-trade into investment and thereafter, the purchases made were recorded in the books as investment. In the balance sheet of 31st March, 2005, the shares were disclosed as investment in the balance sheet. Therefore, in the year under consideration, it cannot be said that the shares were held by the assessee with the intention of carrying on adventure or business in such shares. The Assessing Officer has not given any reason for his inference that the purchases were made with the intention to resale them at a profit. The intention of an assessee is to be gathered from the facts on record and the undisputed facts on record are that as on 30th September, 2004, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is reported in 334 ITR 308 (Statute). 13. In the case of Rohit Anand (supra), on the similar facts, the Assessing Officer has treated the profit from sale of shares as profits and gains of business as against the capital gain claimed by the assessee. The ITAT accepted the assessee's contention with the following finding:- "9. We have carefully considered the relevant facts and the findings of both the authorities below. The assessee in his individual carries on business of jewellery. Apart from said business, the assessee invested in shares and treats shares as investment in his books of account. This itself manifest the intention of the assessee as to whether he proposed into dealing in shares or earn dividend and profit out of such investment. The Assessing Officer was guided more because of the total amount involved rather than the actual intention and the way of carrying on share transaction. There is no doubt that even a single transaction can be in the nature of trade but the assessee has demonstrated that his intention was never to trade in shares. The intention is manifested by treatment given to such investment that the investment is out of own fund and not borrowed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as capital gain and not as profits and gains of business. We, therefore, uphold the orders of the learned CIT(A)." 14. The Revenue, aggrieved with the order of the ITAT, filed appeal before the Hon'ble Jurisdictional High Court and Hon'ble Jurisdictional High Court, vide order dated 16th August, 2010 in ITA No.1135/2010, upheld the order of the ITAT and held as under:- "4. In our opinion, the factual findings of the final fact finding authority are neither perverse nor contrary to record. Accordingly, we find that no substantial question of law arises in the present appeal." 15. The facts of the assessee's case are identical. Therefore, the above decision of ITAT which is approved by Hon'ble Jurisdictional High Court would be squarely applicable. Considering the totality of the above facts and relying upon the decision of ITAT, Hon'ble Bombay High Court as well as Hon'ble Apex Court in the case of Gopal Purohit (supra) and of the ITAT and Hon'ble Jurisdictional High Court in the case of Rohit Anand (supra), we are of the opinion that the Assessing Officer was not justified in treating the short term capital gain as income from business or profession. We, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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