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2016 (5) TMI 858 - ITAT DELHI

2016 (5) TMI 858 - ITAT DELHI - TMI - Taxation of income from Short Term Capital Gain and Long Term Capital Gain at special tax rate u/s 111(A) & 112 - business of activities in shares and securities - Held that:- The intention of the circular is clearly to reduce the litigation and maintain consistency. The submissions of the Ld. DR that the transaction was very much voluminous and, therefore, Assessing Officer by taking into the modus operandi of the assessee treated the same as business incom .....

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this particular year. The case law which was cited by the Ld. DR is not applicable to the facts of the present case because in that case the shares were held for only two to three days period but the assessee’s situation in the present case is totally different. The CIT (A) has taken into cognizance of these factors and rightly treated the same as short term capital gain and in fact CIT(A) has taxed certain amount after examining all the transactions related to share trading. The assessee’s pro .....

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BOMBAY HIGH COURT ). In our opinion, the CIT(A) has rightly taken into cognizance that the said judgment also held that where investment has been made and the income from the same was exempt from tax thus, the A.O is duty bound to make the disallowance u/s 14A by adopting a reasonable basis. The CIT(A) has rightly restricted the disallowance to the extent of 10% of exempted income. Thus, this ground of the Revenue is also does not survive.- Decided against revenue - I.T.A. No. 2442/DEL/2011 - Da .....

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21,14,240/- and Long Term Capital Gain at ₹ 50,42,972/- from shares to be taxed at special tax rate u/s 111(A) & 112 of the IT Act, 1961 and not to be considered as business income as assessed by the A.O. 2. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erroneously restricted the disallowance to 10% of the exempted income as against the disallowance of ₹ 68,78,340/- made by the A.O. 3. The assessee company is engaged in the business of activities in sh .....

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The assessee was asked to show cause as to why the Short Term and Long Term Capital Gain declared by the assessee shall not be assessesd as business income. The assessee submitted its reply thereby stating that the assessee is not a share trader having any share shop, Membership of stock exchange, registration with SEBI or other association of share traders etc. It was further submitted that in commercial world nobody considered the assessee as a share trader, therefore, in natural way, all acq .....

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bmissions of the assessee observed that although the assessee has mentioned purchase of shares as investments in its books of accounts but looking to the nature of transactions of shares, it was found that the assessee was doing frequent transactions for sale and purchase of shares which was evident from the inventory of opening stock/closing stocks. The Assessing Officer has also taken into cognizance of Circular No. 4/2007 dated 15/06/2007 issued by CBDT and held that the assessee has declared .....

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rough an agent, the income from such transactions is liable to tax as the income of the investor and thus the Assessing Officer held the Short Term Capital Gain as well as Long Term Capital Gain earned on entire sale and purchase of shares i.e. ₹ 71,57,912/- as business income by rejecting the Special Tax treatment as per Section 111(A). The Assessing Officer further disallowed ₹ 68,78,340/- u/s 14A of the Act by holding that the investment made being a conscious decision and having .....

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wance of the expenditure in relation to income not found part of total income. 5. Being aggrieved the assessee carried the matter to the CIT(A) who has held that Long Term Capital Gains of ₹ 50,42,972/- was on the shares which have been held by the assessee for many years and there was no justification given by the Assessing Officer for treating the same as business income when for the last many years the same was treated as capital gain. Therefore, as per Circular No. 4/2007 dated 15/06/2 .....

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y of the A.O to make the disallowance u/s 14A by adopting reasonable basis and thus restricted the disallowance to 10% of exempted income. Now the Assessee is in appeal. 6. The Ld. DR submitted that the transactions on its volume and on the basis of the trading in a single day were very much high and is rightly treated as business by the Assessing Officer. It was further submitted that no separate account was maintained by the assessee and the intention of the assessee was clearly for the tradin .....

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was doing business activity and wrongly treated it as investments and had shown capital gain. The Ld. DR while supporting the order of Assessing Officer stated that Rule 8D is Procedural Rule and, therefore, will have retrospective operation. In so far as, all pending proceedings as on date of notification are concerned, the Ld. DR relied upon the case of CIT Vs. M/s DM Components Ltd. passed by Hon ble Delhi High Court wherein the assessee has claimed the amounts were not business income but t .....

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nk accounts for conducting a business and making investments. The Assessing Officer admittedly stated that the Profit and Loss Account clearly shows that the assessee was having Short Term Capital Gain as well as business income so there was clear bifurcation of both the incomes. In-fact, for Short Term Capital Gain the assessee has not utilized any borrowed fund. The Ld. AR submitted that the judgment which was relied by the Ld. DR was in respect of transactions dealing with shares held only fo .....

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:- ..a) Where the assessee itself, irrespective of the period of holding the listed shares and securities, opts to treat them as stock-in-trade, the income arising from transfer of such shares/securities would be treated as its business income, b) In respect of listed shares and securities held for a period of more than 12 months immediately preceding the date of its transfer, if the assessee desires to treat the income arising from the transfer thereof as Capital Gain, the same shall not be put .....

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e CBDT. The assessee also relied upon the case of CIT Vs. Gopal Purohit (2011) 336 ITR 287 (Bombay) which was confirmed by the Hon'ble Supreme Court. In respect of Ground No. 2, the Ld. AR submitted that Rule 8D will not be applicable for the present Assessment Year 2007-08 as held in Jurisdictional High Court in the case of Maxopp Investment Ltd. vs. CIT reported at 347 ITR 272. 8. We have perused all the records and heard both the parties. The Ld. DR s contention that the circular dated Fe .....

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