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TMI Blog2016 (4) TMI 739X X X X Extracts X X X X X X X X Extracts X X X X ..... as filed by it on 22.09.2008 declaring total income of Rs. 7,89,68,770/-. On scrutiny, the assessee filed revised return filed on 31-03-2010 declaring a total income of Rs. 8,24,36,127/- in response to the notices U/s 143(3) and 142(1) of the Act. 4. In the said return, During the year under consideration, the assessee had declared an income under the head "short-term capital gain" for short as STCG hereafter as on sale of shares made amounting to Rs. 3,64,42,754/-. the Assessing Officer during the course of assessment proceedings, he was of the view that the profit on sale of shares amounting to Rs. 3,64,42,754/- offered by the assessee as short-term capital gain was in the nature of business income having regard to the relevant facts of the case. He, therefore, required the assessee to explain as to why the said income should not be brought to tax in its hands as business income instead of short-term capital gain. In reply, it was explained by the assessee-Company that it maintains separate Demat account for the purpose of holding securities in the nature of stock-in-trade and investment and the securities purchased as stock-in-trade and investment are credited to the respective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther argued that the finding of the AO was not based on material and was factually wrong. In fact the appellant conducted in all 72 purchase transactions and 119 sale transactions on account of short term investments. The appellant, therefore, submitted that the AO's conclusion that the appellant conducted large and voluminous transactions running into thousand, was factually incorrect and based on such incorrect presumption of facts he arrived into a fallacious conclusion that the appellant was a dealer in shares. The AR of the appellant has further submitted that the AO in the impugned order accepted the appellant to be Investor in shares whenever period of holding of shares exceeded one year. It is stated that the capital gains realized on sale of Investments, where holding period exceeded one year, was assessed as Long Term Capital Gains and exemption permissible u/s 10(38) has been allowed. The appellant, thus, argued that the AO could not artificially create a distinction between investment of shares on the basis of holding period. It is submitted on the basis of material on record that both short term and long term investments were acquired through the same demat acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of the Revenue's case on this issue and contended that all the material aspects, which are relevant to decide as to whether the relevant shares were purchased and held by the assessee as stock-in-trade or investment, have been duly taken into consideration by the Assessing Officer. 9. The ld. Counsel for the assessee, on the other hand, strongly supported the impugned order of the ld. CIT(Appeals) allowing the claim of the assessee on this issue and contended that the detailed submissions made by the assessee before the ld. CIT(Appeals) as well as the findings/ observations recorded by the ld. CIT(Appeals) thereon in his impugned order may be taken into consideration while deciding this issue. He also pointed out that a similar claim of the assessee for short-term capital gain was accepted by the Assessing Officer in the earlier years including the immediately preceding year, i.e. A.Y. 2004-05. In this regard, he invited our attention to the copy of the assessment order passed by the Assessing Officer under section 143(3) for A.Y. 2004-05 as placed at page no. 53 of his paper book. He also contended that the order of the ld. CIT(Appeals) allowing the claim of the assessee in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined by the assessee for investment were also treated as investment in the books of account of the assessee and the same were valued at cost. On the other hand, the shares credited to the Demat account maintained by the assessee for stock-in-trade were given the same treatment in its books of account and the same were not only valued at cost or market price, whichever is lower, but even the substantial profit earned by the assessee from the sale thereof was offered to tax as business income. Similarly profit arising from derivative transactions and intraday transactions was offered by the assessee as business income. As found by the ld. CIT(Appeals), if the shares held by the assessee as investment were to be valued at cost or market price, whichever is lower going by the treatment given by the Assessing Officer to the said shares as stock-in-trade while bringing the gain in question as business income to tax in the hands of the assessee, the assessee would have become entitled for loss of Rs. 3,15,96,300/-. However, no such loss was claimed by the assessee-Company showing its clear intention to hold the said shares as investment and not stockin- trade. It is also observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by appellant Revenue is answered in favour of assesse and consequently, ground no-1 is dismissed. 14. Ground No. 2 of in this appeal for A.Y. 2008-09, the Revenue has challenged the action of ld. CIT(Appeals) about the quantum of disallowance in restricting the disallowance of Rs. 34,67,355/- against Rs. 80,46,448/- as made by the Assessing Officer under section 14A of the Act. 15. During the year under consideration, the assessee-Company had received exempt income in the form of dividend amounting to Rs. 5,84,10,892/- and long-term capital gain for short LTCG hereafter amounting to Rs. 25,77,90,442/-. The disallowance on account of expenses of Rs. 34,67,355/- incurred in relation to the said exempt income, however, was offered by the assesese on its own as required by the provisions of section 14A. On verification of such computation made by assessee for making disallowance on its own, the AO found the direct expenditure of Rs. 14,30,718/- was reasonable with reference to dividend. 16. On LTCG, considering the total receipts of Rs. 43,30,71,742/- the AO arrived at disallowance of Rs. 1,00,08,431/- and applying Rule 8D(iii) at 0.5% of average investment, he worked out the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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