TMI Blog2014 (4) TMI 1104X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was only for the purpose of making investment and not for entering into any venture of trade. Under these facts and circumstances, we hold that the gain arising out of sale of shares should be assessed as capital gain and not as a business income. The fundings of the Assessing Officer and the learned Commissioner (Appeals) are based on various decisions which cannot be held to be applicable universally in all the cases, because in such kind of transaction, each fact of the case has to be analysed, depending upon the intention of the assessee and also the other attendant circumstances. - Decided in favour of assessee Disallowance u/s 14A - Held that:- on a perusal of the relevant material on record, it is seen that the assessee has onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal Gains' as returned by the Appellant. The Learned CIT(A) erred in law and on facts and in circumstances of the case in holding that the principle of res judicata does not apply to the fact of the case. 2.0 Ground No.2: Disallowance u/s. 14A of the Act. On the facts and circumstances of the case and in law, the learned CIT(A) erred in upholding the action of the AO of making disallowance u/s. 14A and thereby disallowing expenditure amounting to ₹ 64,349/- on the alleged ground that the said expenditure is incurred for earning tax-free dividend income, whereas the total expense incurred and claimed by the appellant is ₹ 2,170/-. The Ld. CIT(A) failed to appreciate and ought to have held that where no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold before they are listed in stock exchange and, therefore, they cannot be treated as share trading activity. In the earlier years, the Department has assessed the transaction of IOP shares as capital gains. However, the Assessing Officer rejected the assessee s contention and held that the nature of transactions has to be seen from the intention behind and, hence, cannot be determined from the nature of assets being traded. Once these IPO shares are listed, they became freely tradable and, therefore, they are tradable assets. After detail discussion, he treated the income from short term capital gain at ₹ 2,74,187 as business income. 3. The learned Commissioner (Appeals) has confirmed the finding of the Assessing Officer main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchase of shares in IPO has been shown as investment. Further, the assessee has no employee or salary cost and the total expenditure is only ₹ 2,170 out of which ₹ 1,780 is on account of accounting charges and ₹ 420 as bank charges. All the shares are delivery based and there is no repetitive transaction. All these facts can only lead to a conclusion that the assessee s intention was not to do any trading in shares but only to buy the shares as investor. Thus, as a matter of consistency and also on the facts of the case, the gains shown from the sale of shares should be assessed as short term capital gain and not as a business income. 5. The learned Departmental Representative, on the other hand, submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequent years, wherein the income has been offered as capital gain and the same has been accepted by the Department under scrutiny proceedings under section 143(3). Further, the investments have been made through own funds and no borrowed funds have been utilized. Thus, the intention of the assessee was only for the investment and not for trading of shares. Moreover, there is no repetitive transaction and all are delivery based, hence, any gain arising out of such transaction is to be assessed as capital gain. On the other hand, Revenue s case is that the period of holdings is quite less and number of transactions is also huge, therefore, it should be assessed as business income. While adjudicating such kind of cases, the primary parameter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned order passed by the learned Commissioner (Appeals) and allow the ground no.1, raised by the assessee. 7. In ground no.2, the assessee has challenged the disallowance of ₹ 64,349 under section 14A. 8. The Assessing Officer noted that the assessee has derived dividend income of ₹ 479, which was claimed as exempt. Against this the assessee has not allocated any expenditure and, accordingly, he worked out the disallowance of ₹ 64,349 after taking 0.5% of the average value of the investment. 9. Before the learned Commissioner (Appeals), the assessee s case has been that the assessee has not debited any expenditure and only amount of ₹ 2,170 has been debited which is on account of Accountant s fees and bank ..... X X X X Extracts X X X X X X X X Extracts X X X X
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