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DCIT, Circle-2, Pune Versus Shri Arihant Gajendrakumar Patni and Others

2016 (4) TMI 31 - ITAT PUNE

Capital gain v/s business income - activity of transaction in shares/mutual by engaging PMS - Held that:- Activity of transaction in shares/mutual funds by engaging PMS was an investment activity and therefore the resultant gain was assessable under the head capital gains - Decided against revenue

Disallowance u/s.14A - Held that:- As decided in assessee's own case CIT(A) has given a categorical finding that expenditure on PMS has not been claimed by the assessee and there does not re .....

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are directed against the separate orders dated 30-04-2014 of the CIT(A)-II, Pune relating to Assessment Year 2010-11. Since identical grounds have been taken by the revenue in the above appeals, therefore, these were heard together and are being disposed of by this common order. 2. First we take up ITA No.1508/PN/2014 as the lead case. In grounds of appeal No.1 to 4 the revenue has challenged the order of the CIT(A) in holding that the activity of transaction in shares/mutual fund by engaging P .....

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o whom the assessee had entrusted certain funds. As per the PMS agreement, the funds of the assessee were invested in stock market by the above party and the assessee had earned short-term capital gains/loss and long term capital gains on sale of shares. The A.O. following the stand taken and the reasoning given in this regard in assessee s case for A.Y. 2006-07, A.Y. 2007-08 and A.Y. 2008-09, held the gains/loss in respect of investments through PMS taxable as business income and allowed the re .....

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before us. 6. After hearing both the sides, we find the issue stands decided in favour of the assessee and against the revenue by the decision of the Tribunal in assessee s own case for A.Y.2008-09 which has been followed by the CIT(A). We find following the above decision the Tribunal in the case of Smt. Sadhana Ashok Kumar Patni and other connected appeals vide ITA No.1835 to 1837/PN/2013 and ITA No.1847/PN/2013 order dated 24-09-2014 for A.Y. 2009-10 has held that activity of transaction in s .....

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therefore, in absence of any contrary material brought to our notice by the Ld. Departmental Representative against the order of the Tribunal, we find no infirmity in the order of the CIT(A) deleting the disallowance made by the AO. Accordingly, the same is upheld and the grounds of appeal No.1 to 4 by the revenue are dismissed. 7. In grounds of appeal No.5 the revenue has challenged the order of the CIT(A) in deleting the disallowance of ₹ 10,95,983/- u/s.14A of the I.T. Act. 8. Facts of .....

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or A.Y.2008-09 deleted the disallowance by observing as under : 4.2 The A.O. has applied the Rule 8D to arrive at the disallowance of ₹ 10,95,983/-. However, disallowance u/s.14A requires finding of incurring of expenditure and where it is found that for earning exempted income no expenditure has incurred or claimed, disallowance u/s.14A cannot stand. The expenditure on PMS has not been claimed by the assessee and, therefore, there does not remain any other expenditure other than this expe .....

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the CIT(A). The learned CIT(A) has given a categorical finding that expenditure on PMS has not been claimed by the assessee and there does not remain any other expenditure other than this expenditure, therefore, no disallowance u/s.14A r.w. Rule 8D can be made. The above factual finding given by the learned CIT(A) could not be controverted by the learned DR. Under these circumstances, we hold that the learned CIT(A) was justified in deleting the disallowance made by the AO. Grounds raised by th .....

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order has discussed the issue and dismissed the ground raised by the revenue. The relevant observation of the Tribunal reads as under : 9. After hearing both the sides, we find the AO disallowed an amount of ₹ 5,57,396/- being 0.5% of the average investment of the funds deployed as expenditure incurred for earning tax free dividend income. In appeal the learned CIT(A) deleted such disallowance on the ground that disallowance u/s.14A requires finding of incurring of expenditure and where i .....

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