TMI Blog2011 (2) TMI 1369X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in directing the Ld. A.O. to enhance the disallowance of expense u/s 14A to `67,395/- as against `14,430/- disallowed by the Ld .A.O. 3) In any view of the matter and in any case, additions of ₹ 30,81,610/- and disallowing ₹ 67,395/- are bad in law and against the facts and circumstances of the case. 4) That the order passed by Ld. CIT(A) is against the principles of natural justice. 2) The 1st issue for consideration relates to confirmation of the action of the A.O. assessing the short-term capital gain of ₹ 30,81,610/- as income form business or profession. The facts of the case stated in brief are that the assessee is engaged in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. A.R. of the assessee submitted that the assessee had treated the units of mutual fund as investment. In Assessment Year 2005-06, the A.O. has accepted the profits arising on sale of units under the head capital gain . In the books of accounts, the stocks have been valued at cost. The assessee is not an investment company and was not dealing in shares. The assessee s main business consists of trading in periodicals. Therefore, the profits arising on sale of units of mutual funds is to be treated as income under the head capital gains . On the other hand, Ld. Sr. D. R submitted that purchase of mutual funds are to be treated as profits under the head business or profession . The intention of the assessee was to earn profits immediatel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the head capital gains and not under the head business or profession . The issue is covered by the decision of Hon'ble High Court of Delhi in the case of Ess Jay Enterprises P. Ltd. (supra) wherein Hon'ble High Court of Delhi has held that the treatment given to a transaction in the books of accounts is of importance. The assessee had shown shareholding as an investment and not stock in trade of business. There was nothing on record to show that shares/units of mutual funds were converted into stock in trade. Under these circumstances, profits earned under the head investment was treated under the head capital gain. Respectfully following the decision of Hon'ble High Court of Delhi it is held that profits on sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d w.e.f. 24.03.2008, are not retrospective in nature and shall apply w.e.f. Assessment Year 2008- 09. In view of these facts, we are of the considered opinion that Ld. CIT(A) was not justified in invoking the provisions of Rule 8D for the Assessment Year 2006-07 under consideration. However since the disallowance u/s 14A is to be made in respect of the expenditure incurred in relation to exempt income, we feel it proper to set aside the matter to the file of the A.O. with the direction to determine the disallowance of expenditure relatable to the exempt income in the light of decision of Hon'ble High Court of Bombay in the case of Godrej Boyce Mfg. Co. Ltd. (supra). The A.O. is directed accordingly. 6. In the result, appeal filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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