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TMI Blog2015 (11) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... apital gains' only. 2. The Ld.CIT(A) has erred in law and on facts in directing the A.O. to consider the Short term capital gain Rs. 13,90,773/- from sale of shares held for period more than one month to be assessed as income chargeable as short term capital gain. 3. The Ld.ClT(A) has erred in law and on facts in directing the AO to verify the working submitted by the assessee and if the same is found correct, AO is directed to allow interest expenditure of Rs. 13,85,842/-out of disallowing the claim of deduction of Rs. 20,28,945/- on account / of overdraft. 4. On the facts and circumstances of the case and in law, the CIT(A) ought to have upheld the order of the A.O. 5. It is, therefore, prayed that the order of the CIT(A) may be setaside and that of the A.O. may be restored to the above extent." 2. Briefly stated facts are that the case of the assessee was taken up for scrutiny assessment and assessment u/s.143(3)of the Income Tax Act, 1961, (hereinafter referred to as 'the Act') was framed vide order dated 30.11.2009. The Assessing Officer treated the long term capital gain of Rs. 19,59,688/- and short term capital gain of Rs. 13,90,773/- as business income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of appellant, so far as the income from long term capital gain from sale of shares of Rs. 19,59,688/-, is concerned, the period of holding undisputedly is greater than one month hence applying the ratio of the case of Sugamchand C. Shah (supra), I direct the Assessing Officer to consider the said income of Rs. 19,59,688/- from long term capital gain from sale of shares as 'income from capital gains' only. In case of income shown as short term capital gain, the appellant was asked to submit the working of the shares held for less than a month. From the working submitted by the appellant, it is gathered that the entire short term capital gain shown at Rs. 13,90,773/-is from the sale from sale of mutual funds which are held for more than 1 month, accordingly applying the decision of Ahmedabad ITAT in the case of Sugamchand C. Shah (supra), I direct the Assessing Officer to consider the short term capital gain Rs. 13,90,773/- from sale of shares held for period more than one month to be assessed as income chargeable as short term capital gain." We find that the co-ordinate Bench in A.Y. 2006-07 has reproduced the finding of ld. CIT(A) which is as under: 9. The pref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchased a year or earlier showing that the assessee had intention while purchasing them to hold them and they were reflected in that balance-sheet as investment. The assessee has enjoyed dividend income and declared the same in the return of income trading the transactions as investment, even if frequency of selling of shares may be more but in respect of shares held for a considerable longer period (for more than 366 days) as per finding given by the Learned CIT(Appeals). This finding remained uncontroverted. The assessee has earned gain of Rs. 37,52,281/-, on sale of those shares which were held for more than 366 days and upto 6832 days. In any case, when those shares were purchased it could not be said that intention of the assessee was to deal in them and not to hold them as investment. Even in, the case of investment it is for the assessee to decide when to dispose them off so that to give maximum return out of them. There is no theory that asset held on long-term basis should be sold only at the time of need or in emergency. He can very well sale theinvestments to reap the benefit when prices of shares are highso as to earn better gains and make investment elsewhere. In our c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s,the learned counsel of appellant has submitted that gain frominvestment portfolio should be taxed as income from capital gain. In the case of appellant, it is noticed that assessee has shown income from sale of shares as capital gains as well as income from business & profession as per books of account maintained. The claim of appellant that any assessee can hold two portfolios is supported by para 10 of circular no 4/2007 dated 15/06/2007 which reads as under: 10. "CBDT also wishes to emphasize that it is possible for a tax payer to have two portfolios, i.e. an investment portfolio comprising of securities which are to be treated as capital assets and a trading portfolio comprising of stock-in-trade which are to be treated as trading assets. Where an assessee has two portfolios, the assessee may have income under both heads i.e., capital gains as well as business income." 3.9 Applying the ratio of decision ofAhmedabad ITA T referred herein above, profit on sale of shares wherein shares are held for less than one month is treated as income from business and profession and remaining amount of income is considered as capital gain. From the details of capital gain submitted by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onth is treated as income from business and profession and remaining amount of income is considered as capital gain. From the details of capital gain submitted by appellant, it is evident that appellant has earned loss of Rs. 14,69,622 from sale of shares & mutual funds in A.Y. 2005-2006 and profit of Rs. 23,26,630 in A.Y. 2006- 2007 wherein holding period is less than one month, hence Idirect assessing officer to tax such income/loss as income from business & profession. 3.10 The Assessing officer at page no 14 of the assessment order for A. Y. 2005-2006 has stated that appellant has acquired shares of TCS, NTPC and PNB in IPO for which borrowed funds were utilized. Such an activity has to be termed as an organized and systematic activity, carried on continuously with to earn profits. The sole intention at .the time of acquisition of shares through such mode was to sell these shares at a profit and such activity has to be construed as adventure in the nature of trade. In F. Y2004-2005, the appellant has earned gain of Rs. 19,48,364 from sale of TCS shares, hence, Assessing officer is directed to consider such gain as income from business & profession. So far as profit from PNB i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non interest bearing funds on share investments acquired at IPO stage in HN1 category. The assessee's salary income is more than share profits in these years. This proves her to be only a prudent investor instead of a trader. There is no evidence in this case file demonstrating the assessee to be engaged in any organized activity of share trading. No evidence of any repetition of her share transactions in the impugned assessment year or reinvestment of the capital gain is forthcoming. She has also been maintaining stock portfolio qua some of her share investments (supra). These profits from sale of shares have arisen from the shares not forming part of her stock. All the assessee had done is to sell theshares in a period of less than three months. Rather one scrip has been sold within three days in the former assessment year. And in a similar span of holding period in the latter assessment year wherein she purchased IDFC, IL & FS shares on 8.8.2005 and 20.7.2005 and sold them on 18.8.2005 for profits of Rs. 11,23,961/-. The case file reveals that the assessee in Vaibhav Shah case had entered into 64 sale transaction in 27 scrips and 17 sale transactions in 11 scrips in two con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Supreme Court decision in case of Keshavji Ravji & Co. vs. CIT (1990) 183 ITR 1 (SC). Ld. Counsel also relied on the decision of Gujarat High Court in case of CIT vs. Wintex Mills Ltd. (2000) 245 ITR 266 (Guj.). Ld. Counsel for the assessee submitted that in view of the ratio laid down by the Hon'ble Courts, on the basis of principle of netting the whole interest out of Rs. 20.25 lacs on overdraft was required to be deducted from much bigger sum of interest received on FDs Rs. 40.96 lacs. He submitted that the finding that there is no nexus between sums of overdraft account and the FDs made with various banks, same is not borne out from the records. He submitted that under these facts, the entire interest as claimed by the assessee is required to be allowed. 8. We have considered the rival contentions and perused the material on record. There is no dispute with regard to the position of law that the expenditure not being in the nature of capital expenditure made out or extended wholly or exclusively for the purpose of earning interest income is allowable for deduction u/s.57 of the Act. The contentions of the assessee is that the interest paid to the banks in respect of ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes. The assessee has demonstrated through accounts that the FD and OD facility was utilized for the purpose of making FDs only. Under these facts, we are of the considered view that the assessee is entitled for deduction of the interest income. Moreover, in the light of ratio laid down by the Hon'ble Apex Court in case of Keshavji Ravji & Co. vs. CIT (supra) and Hon'ble Gujarat High Court in case of CIT vs. Wintex Mills Ltd.(supra), on the basis of principle of netting, the assessee was entitled for deduction in respect of the interest paid on overdraft account. Therefore, we hereby direct the Assessing Officer to delete the disallowance of Rs. 6,43,103/-. The ground of assessee's Cross Objection is allowed. 11. Now we take up Revenue's appeal in ITA No. 2692/Ahd/2011 for A.Y. 2008-09. 12. The only ground in this appeal is against directing the Assessing Officer to allow the interest expenditure of Rs. 19,37,686/-. Ld. Sr. D.R. submitted that ld. CIT(A) was not justified in deleting the disallowance and strongly supported the order of Assessing Officer. On the contrary, ld. Counsel for the assessee submitted that the ld. CIT(A) has given finding in fact which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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