TMI Blog2015 (11) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer disallowed the claim on the basis that the facilities were not used for making investment in FD and sum was not wholly or exclusively for the purpose of earning of interest income of FDs. On the contrary, the ld. CIT(A) had given the finding that so far interest paid on bank overdraft with HSBC Bank, ICICI Bank and, PNB. The nexus has been established between the interest paid and interest earned. Therefore, we do not see any reason to interfere into this finding of ld. CIT(A). This ground of Revenue's appeal is rejected. - Decided in favour of assessee. Disallowance of deduction of total outgo for interest - Held that:- 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 (1990 (2) TMI 1 - SUPREME Court) and Hon'ble Gujarat High Court in case of CIT vs. Wintex Mills Ltd.(1999 (9) TMI 24 - GUJARAT High Court ), on the basis of principle of netting, the assessee was entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 13,90,773/- as business income of assessee on the surplus arising on sale of shares. In view of Assessing Officer, it was nothing but the business income of assessee and shares as trading assets. Assessing Officer also disallowed the deduction of ₹ 20,28,945/- claimed by assessee as expenditure towards earning interest income or FDRs. 3. Assessee aggrieved by this order preferred an appeal before ld. CIT(A) who after considering the submissions partly allowed the appeal. The ld. CIT(A) by following the decision of the Tribunal in case of Shri Sugamchand C. Shah in ITA No. 3554/Ahd/2008 vide order dated 29th January, 2010 directed the Assessing Officer to treat the income of ₹ 19,59,688/- as long term capital gain from sale of shares. The ld. CIT(A) also directed the Assessing Officer to consider the short term capital gain of ₹ 13,90,773/- from the sale ofshares held for the period more than one month to be assessed as income chargeable as short term capital gain. However, in respect of ₹ 20,28,945/- as claimed by assessee. Ld. CIT(A) allowed deduction to the extent of ₹ 13,85,842/- subject to verification of the working given by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in A.Y. 2006-07 has reproduced the finding of ld. CIT(A) which is as under: 9. The preferred two separate appeals in both assessment years. The CIT(A) has partly accepted her contentions as under: 3.6 I have carefully considered the assessment orders passed by assessing officer and submissions made by appellant. The appellant has shown income from short term capital gain from sale of shares and mutual funds for ₹ 8,86,194/- in A.Y.2005-2006 and ₹ 1,13,61,717/- A.Y.2006-07. It is noticed that the Assessing Officer has not accepted the contention of the appellant that the impugned surplus was capital gains mainly on the ground that the volume involved was large and, therefore, according to him, it became commodity for the assessee in which it is trading. He has further gone by the criteria that period of holding is short and frequency and number of transactions is more. He has therefore come to the conclusion that the motive is to earn maximum profit and not to have investment. 3.7 In the present case, the issue of determination is as to whether the surplus arising from sale of shares mutual funds is to be taxed asshort term or long term capital gain or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o reap the benefit when prices of shares are highso as to earn better gains and make investment elsewhere. In our considered view, it is the decision of the assessee to dispose of an investment, if according to him, market value thereof have reached a plateau so as to make investment in other assets which have potential of appreciation in market value. This decision to sell his investment at high market price cannot convert an otherwise investment into trading. If in the past, the Department has accepted the sale of shares of holdings of more than a year as investment and profits thereon has been assessed under the head capital gain , then there is no reason to hold differently this year. We accordingly confirm the order of the Learned CIT(Appeals) in respect of holding that profit of ₹ 37,52,281/- should be assessed as 'long-term capital gain'. 14 In respect of profit of ₹ 55,40,679/- being 'short-term capital gain as claimed by the assessee and held as profits assessed under that business by two authorities, we found that in many cases there is delivery of shares and share were registered in the name of the assessee. The holding period of the shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 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 ₹ 14,69,622 from sale of shares mutual funds in A.Y. 2005-2006 and profit of ₹ 23,26,630 in A.Y. that assessee is de facto selling and purchasing shares as trader. He is also holding shares for long period indicating that they are held as investment. Therefore, a criteria has to be fixed for determining as to when he is acting as trader and when as investor. Accordingly, we decide following criteria to hold when gains are to be taxed as profit to be earned under the business or to be taxed as short term capital gain. We hold that if shares are not held even say for a month, then the intention is clearly to reap profit by acting as a trader and he did not intend to hold them in investment port-folio. We believe that if a person intends to hold his purchases of shares as investment, he would watch the fluctuation of rates in the market for which a minimum time is necessary, which we estimate at one month. Where shares are held for more than a month, they should be treated as inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 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 is considered, appellant has incurred loss of ₹ 14,97,820 and as same has been sold within one month, suchtransaction is already considered as business income/loss in para 3.9 herein above. The transactions in NTPC has already been considered as income from business profession hence no adverse inference is called. Considering these, I direct assessing officer to consider income of ₹ 4,78,742(Rs19,48,364 less ₹ 14,69,622) as income from business profession and remaining income of ₹ 4,07,452 as income from capital gains. 3.11 Similarly in A. Y. 2006-2007, appellant has acquired shares of IDFC and Yes Bank from borrowed funds as observed by assessingofficer at page no 13 14 of assessment order. Considering these, income of ₹ 2,71,418 from sale of Yes Bank is treated as income-from business profession. So far as profit from IDFC is concerned, same is already treated as income from business in preceding para. In view of such observation, gain of ₹ 25,98,048 (23,26,630 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them on 18.8.2005 for profits of ₹ 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 consecutive assessment years which had been held to have resulted in capital gains instead of business income. A co-ordinate bench in identical case of Hitesh Doshi 46 SOT 336 (Mum.) held that when an assessee maintains similar number of companies and only number of shares therein increase or decrease, he is only a prudent investor. We take into account all the abovestated facts, circumstances and case law quoted hereinabove to hold that the assessee is an investor not engaged in the business of sale purchase of shares and mutual funds. The question is accordingly decided against the Revenue both assessment year. The Assessing Officer is directed to treat her income from sale of shares and mutual funds in the two assessment years as short term capital gains and pass a consequential order. The assessee's grounds succeed in her two appeals and that of the Revenue fail. There is no change into facts and circumstances in the present case, therefore, taking a consistent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 over draft accounts was extended wholly and exclusively for the purpose of earning of the interest income. Therefore, it was required to be allowed. On the contrary, the Assessing Officer disallowed the claim on the basis that the facilities were not used for making investment in FD and sum was not wholly or exclusively for the purpose of earning of interest income of FDs. On the contrary, the ld. CIT(A) had given the finding that so far interest paid on bank overdraft with HSBC Bank, ICICI Bank and, PNB. The nexus has been established between the interest paid and interest earned. Therefore, we do not see any reason to interfere into this finding of ld. CIT(A). This ground of Revenue's appeal is rejected. 9. Now, coming to the Cross Objection No.43/Ahd/2011, assessee has raised following grounds: 1. On the facts and in the circumstances of the case, the CIT(A) has erred in not allowing deduction of total outgo for interest in a sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est expenditure of ₹ 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 is not controverted by the Revenue. Therefore, he submitted that there is no illegality in the orderof CIT(A). Same may be upheld. 13. We have heard the rival contentions and perused the material on record. The ld. CIT(A) in para 4 of this order has decided the issue as under: 4. As regards the FD with PNB of ₹ 6 crores invested on 3/1/2007, the FD was matured on 18/4/2007 for ₹ 606,51,866/-. This amount has been utilized by the appellant for the repayment of OD Account with PNB on 18/4/2007 which resulted into the credit balances of ₹ 65,0,122/-. Similarly, the OD of ₹ 3,23,10,000/- as on 31/1/2007 was repaid by the appellant from her saving account with Bank of Baroda by depositing the amount of ₹ 59 lakhs, ₹ 2.30 crores and ₹ 55,29,166/- from ICICI Bank on account of maturity of fixed deposit. Similarly, the HSBC OD Account of ₹ 222 lakhs w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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