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2015 (7) TMI 798 - ITAT MUMBAI

2015 (7) TMI 798 - ITAT MUMBAI - TMI - Computation of income from House property - whether on the basis of standard rent / municipal value where as both the properties at Ghatkopar, Mumbai and Deolali, Nasik are not governed by Rent Control Act and no standard rent has been fixed for these properties by any Controller as directed by CIT(A) - Held that:- AO had determined the ALV without any basis.The FAA has given a categorical finding in that regard and has held that no investigation had been d .....

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the properties not let out ALV had to be based on standard rent.The decisions of the Tribunal relied upon by the FAA support the decision of the FAA.Therefore,we are of the opinion that her order does not suffer from any legal infirmity.Upholding her order, - Decided against revenue.

Share transactions - CIT(A) giving direction that wherever assessee has held shares for more than one month that may be treated as short term capital gain and if the holding period is less than one month .....

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especially when other facts relevant thereto are almost similar. Further, intention of the assessee at the time of purchase of shares is relevant. See Gopal Purohit (2010 (1) TMI 7 - BOMBAY HIGH COURT ). - Decided in favour of assessee.

Deletion of proportionate expenses - assessee has claimed all expenses against short term capital gain only and not a single rupee was attributed to Long Term Capital Gain which is claimed exempt U/s.10(38) of the Act. - Held that:- AO had made proport .....

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pinion, considering the facts and circumstances of the case the order of the FAA does not suffer from any legal infirmity.- Decided in favour of assessee.

Disallowance u/s 14A - CIT(A) giving direction to re-examine and compute 14A disallowance - Held that:- AO had invoked the provisions of Rule 8D, the AY under appeal is 2007-08, that as per Hon’ble Jurisdictional High Court in Godrej & Boyce Manufacturing Company Ltd. Vs. DCIT (2010 (8) TMI 77 - BOMBAY HIGH COURT) Rule 8D was not ap .....

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For the Petitioner : Shri Satish Mody For the Respondent : Shri Asghar Zain V.P. Sr.AR Order u/s.254(1)of the Income-tax Act,1961(Act) PER RAJENDRA, AM Challenging the order dated 26.6.2010 of the CIT(A)-33,Mumbai,the Assessing Officer(AO) and the assessee have filed cross appeals raising various Grounds of Appeal: ITA No.6406/Mum/2010 1. On the facts and circumstances of the case and in law, the Ld CIT(A) has erred in giving direction that income from House property shall be computed on the bas .....

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ed as business income. The direction given is contrary to law, therefore, order of CIT(A) may be set aside and order of A.O. be restored. 3. On the facts and circumstances of the case and in law, the Ld CIT(A) erred in deleting proportionate expenses of ₹ 8,16,667/- out of total expenses of ₹ 11, 12,377/- as assessee has claimed all expenses against short term capital gain only and not a single rupee was attributed to Long Term Capital Gain which is claimed exempt U/s.1 0(38) of the .....

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e appellant craves leave to amend or alter any grounds or add a new ground, which may be necessary. ITA No.6987/Mum/2010 1. a. The learned CIT (A) erred on facts and in law in not accepting the decision of the Hon. ITAT in the case of Gopal Purohit Vs. JCIT which was accepted by her in A.Y.06-07 . b. The learned CIT (A) erred on facts and in law in treating the shares which are held upto one month as Profits from business instead of Short Term Capital Gains. 2. The appellant craves leave to add, .....

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e asked the assessee as to why deemed rent on properties mentioned in Schedule D should not be computed.The assessee argued that annual value of Deolali Flat and Ghatkopar Office has been calculated on Standard Rent,that both the properties were not let out, that in case of Shanita Jain the Tribunal had accepted,for the AY.2002-03,the ALV based on standard rent determinable under the rent control act.The AO held that the explanation of the assessee was not satisfactory.He referred to the provisi .....

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e submissions of the assessee and the assessment Order the FAA held that the AO had estimated rent at ₹ 10,000/- per month, that he had not considered the Municipal value which was a strong evidence representing the earning capacity of the building, that he had calculated the income from house property only on estimate basis, that no investigation was carried out to ascertain the actual fair rent of the property, that the AO had failed to state as to what was the basis/source of his estima .....

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cipal value should be adapted to determine ALV and directed the APO to re-calculate the income from house property by adopting the standard rent/municipal value as yard stick. 2.3.Before us,Departmental Representative(DR)supported the order of the AO.Authorised Representative(AR)relied upon the order of the FAA.We have heard the rival submissions and perused the material before us. We find that the AO had determined the ALV without any basis.The FAA has given a categorical finding in that regard .....

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operties not let out ALV had to be based on standard rent.The decisions of the Tribunal relied upon by the FAA support the decision of the FAA.Therefore,we are of the opinion that her order does not suffer from any legal infirmity.Upholding her order,we decide the Ground No.1 against the AO. 3.Second Ground of Appeal is about Share transactions under taken by the assessee during the year under appeal.During the assessment proceedings the AO found that the assessee had declared Short Term Capital .....

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ared on shares was 6.70 lacs, that the remaining capital gain of 2.01 crores was on shares of 10 companies, that the STCG declared was in nearly 160 scrips. The AO did not accept the contention of the assessee that she should not be treated as trader in shares and held that during the year she traded in 160 scrips, that in most of the scrips she had made a number of transactions on different dates, that shares had been traded in huge volumes on most of the working days of the year.He referred to .....

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carried out by the assessee has to be treated as business. 3.1.During the Appellate proceedings,before the FAA the assessee contended that she had maintained regular books of account wherein two portfolios were maintained,that she was having investment portfolio,that the investment portfolio comprised the securities which were treated as capital assets, that she was also maintaining trading portfolio comprising of stock-in-trade that were treated as trading assets, that she herself had bifurcat .....

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the assessee further contended that he was making investment in shares since 1997 and had disclosed shares/ debentures as investment in the balance sheet consistently since then,that the valuation of the assessee was accepted by the AO in the earlier years,that the intention of the assessee had to be seen from the date of purchase, that right from the beginning she had treated delivery based transactions as investment and not as stock-in trade,that she had never converted investment into stock o .....

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accepted.It was further argued that the assessee did not having any infrastructure for doing business in stock trading on large scale commercial basis.She referred to the case of Janak S.Rangwala(11 SOT 627) and Gopal Purohit(supra). After considering the submission of the assessee and the assessment order,the FAA held that in the immediately preceding AY.the AO had treated the STCG as business income, that the then FAA had allowed the appeal filed by the assessee for AY 2006-07,that the FAA ha .....

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(37 DTR 345) and held that wherever the assessee had held shares for a period of more than 1 month it could be stated that the shares were purchased as investment and their sale would result in STCG,that wherever shares had been held for less than 1 month the resultant gain had to be treated as profit from business. Accordingly the FAA directed the AO to work out and compute the STCG and income from business of the assessee accordingly. 3.2.Before us, the DR partly supported the order of the FAA .....

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filed the return of income for the year under consideration on 16-10-2006 declaring total income of ₹ 2,91,69,761/-. The said income comprised of short term capital gains of ₹ 2,28,16,373/- and income from F & O and speculative transaction of ₹ 64,29,182/-. The assessee had also declared long term capital gains ofRs.1,17,41,141/- arising from sale of shares which were claimed to be exempt u/s.10(38). The income earned by the assessee from the dealing in future and option t .....

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O on page No.2 of his order was as under: i) Investment in shares has been made by the assessee out of her own funds. ii) The shares purchased from time to time have been shown in the books of account by the assessee as her investment all throughout. iii) Investment made by the assessee was spread out in different shares to safeguard her interest, iv) All the transactions of purchase and sale of shares were routed through BSE and NSE and the same were delivery based. v) Intention of the assessee .....

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DR at the outset, invited our attention to the findings / observations recorded by the AO in paragraph No. 2.2.1 to 2.2.8 of his order to hold that the profit earned by the assessee from the transactions of purchase and sale of shares constituted her business income and not capital gains.She strongly relied on the said findings/observations in support of the Revenue s case that the shares were purchased and held by the assessee in the capacity of a trader as stock in trade and the profit arisin .....

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se, the primary motive of the assessee to undertake the transactions in shares was to make profit. She contended that the learned CIT(Appeals), however, simply relied on the decision of the Tribunal in the case of Gopal Purohit (supra) and followed the rule of consistency to give relief to the assessee on this issue. She relied on the following decisions of the Tribunal stating that in the similar facts and circumstances as involved in the assessee s case, profit arising from purchase and sale o .....

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assessee as short term capital gain and long term capital gain depending on the period of holding. He submitted that the short term capital gains as well as long term capital gains declared by the assessee was treated by the AO as her business income and the learned CIT(Appeals) while disposing of the appeal of the assessee vide his impugned order has directed the AO to accept the treatment given by the assessee to the profits arising from sale of shares as short term capital gains and long ter .....

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comes to sell thereof giving rise to long term capital gains and there was no reason or justification to treat her as a trader only in respect of shares, the profits on sale of which gave rise to short term capital gains. He contended that the intention of the assessee cannot be decided merely on the basis of period of holding of shares.He submitted that the assessee has all along maintained two portfolios one in respect of F & O transactions and transactions in shares without delivery and o .....

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estment made in shares. He submitted that the entire loan amount was used by the assessee in the year under consideration for F & O transactions and the investment in delivery based shares was made by the assessee out of her own funds. He submitted that all the delivery based shares purchased by the assessee were treated as investment in the books of account in the earlier years as well as in the subsequent years and the said treatment was accepted by the Department. He submitted that the ma .....

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the assessee, he submitted that the said decision has been upheld even by the Hon ble Bombay High Court and even the SLP filed by the Department in that case has been dismissed by the Hon ble Supreme Court. He cited various decisions of the Tribunal stating that a similar issue has been decided therein in favour of the assessee following the rule of consistency. The Tribunal decided the issue against the AO in para-08-09 which reads as under: 8.We have considered the rival submissions and also .....

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rade, the profit arising from sale thereof would be chargeable to tax in the hands of the assessee under the head Profits & Gains of business or profession . It is, therefore, necessary to ascertain whether the shares were purchased and held by the assessee as investment or stock in trade and this will depend upon the intention of the assessee at the time of purchase of relevant shares. It is well settled that such intention is to be gathered from the relevant facts of each case and as submi .....

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ides have argued their respective cases in the light of these guidelines. However, before we examine the facts of the present case in the light of the said guidelines, there is one peculiar fact involved in the present case which, in our opinion, has a material bearing on the issue involved in the present appeal. 9.It is observed that the claim of the assessee right from the beginning was that all the shares were being purchased and held by her as investor and there was no intention on her part .....

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or short term and long term capital gains. In the present appeal, the Department has challenged the decision of the learned CIT(Appeals) only to the extent it is in respect of short term capital gains. In so far as the claim of the assessee for long term capital gains is concerned which has been accepted by the learned CIT(Appeals),the Department has not challenged the decision of the learned CIT(Appeals) and this is a peculiar fact involved in the present case having material and direct bearing .....

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er facts relevant theretoare almost similar. For instance, if one lot of 1000 shares of a particular company was purchased by the assessee in the earlier year and 500 shares of the said lot were sold by her in the year under consideration before a period of one year andthe balance 500 shares were sold again in the year under consideration but after the period of one year, it cannot be said that there were two different intentions of the assessee behind purchase of the same lot of shares. The int .....

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rule of consistency especially when there was no change in the relevant facts. We, therefore,find no infirmity in the impugned order of the learned CIT(Appeals) treating the assessee as investor in shares and directing the AO to bring to tax the profit arising from the transactions of shares under the head Capital Gains as short term and long term capital gains depending on the period of holding. Respectfully,following the above order of the Tribunal Ground No.2 is decided against the AO as the .....

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that the expenditure was indirectly attributable to LTCG which was exempt. Making a proportionate disallowance of ₹ 8.16 lacs the AO added the said sum to the total income of the assessee . 4.1.During the appellate proceedings,the assessee argued that the disallowance was made in the proportion of profits,that expenses were based on the number of transactions that the transactions under the head LTCG were about 15, that she had hundreds of transactions under the category STCG. The FAA,aft .....

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gainst the SRCG were indirectly attributable to LTCG also. But he has not explained as to what was the basis for arriving at the above conclusions. The AO had without making any enquiry about the nature of expenses and the number of transactions of LTCG made an addition of ₹ 8,61,667/- . We find that the FAA had deleted the disallowance as she was of the opinion that adhoc disallowance should not be made.In our opinion, considering the facts and circumstances of the case the order of the F .....

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irectly related to the exempt income.The AO directed the assessee to submit the computation of income as per Rule 8D of Income tax Rule 1962 (Rules).The assessee calculated the disallowance at ₹ 1.30 lacs. The AO held that the assessee had not computed 0.5% of the investment for making the disallowance. He calculated the disallowance at ₹ 3.08 lacs and made total disallowance of ₹ 4,39,780/-. 5.1.During the appellate proceedings, the assessee submitted that the assessee had cla .....

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