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2016 (7) TMI 5 - ITAT MUMBAI

2016 (7) TMI 5 - ITAT MUMBAI - TMI - Assessability of the profit on sale and purchase of shares and securities - business income u/s capital gain - Held that:- In view of the above precedent, the stand of the lower authorities in treating the assessee as a trader in shares is unsustainable. Pertinently, in the instant assessment order, the Assessing Officer has considered the ‘assessment records for the earlier years’ as well to say that the assessee is not an investor in shares. Now, if in the .....

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s and mutual funds as business income is untenable - Decided in favour of assessee - Disallowance u/s 14A - Held that:- Quite clearly, the provisions of Rule 8D of the Rules are not applicable for the assessment year under consideration following the ratio of the judgment of Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Company Ltd.(2010 (8) TMI 77 - BOMBAY HIGH COURT ). Therefore, the disallowance of ₹ 6,24,577/- worked out by the Assessing Officer is not appropriate. S .....

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ssessing Officer to restrict the disallowance under section 14A at 5% of the exempt income.- Decided in favour of assessee - ITA No. 7999/MUM/2010 - Dated:- 29-4-2016 - SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI JOGINDER SINGH, JUDICIAL MEMBER For The Appellant : Shri Vimal Punmiya For The Respondent : Shri Yogesh Kamat ORDER PER G.S. PANNU,AM: The captioned appeal filed by the assessee pertaining to the A.Y. 2006-07 is directed against an order passed by Ld. CIT(A)-25, Mumbai dated 01/10/2010, .....

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; 27,44,159/ - as Income from business & profession as against long term capital gains claimed exempt under section 10(38) of the Income Tax Act, 1961 by the assessee. 3. The Ld. Commissioner of Income Tax (A) erred in confirming the disallowance of ₹ 6,24,577/ - under Section 14A of the Income Tax Act, 1961 alleging that the said expenses debited to profit and loss account are pertaining to exempt income. 4. The Ld. Commissioner of Income Tax (A) erred in confirming the charging inter .....

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ong term capital gain. Accordingly, ₹ 38,96,224/- was declared as short term capital gain and ₹ 27,44,159/- as long term capital gain, which was claimed exempt under section 10(38) of the Act. The Assessing Officer, however, treated the activity of sale and purchase of shares and mutual funds as a trading activity and thus, treated the aforesaid gains as an income assessable under the head business income . Apart from other arguments set-up by the Assessing Officer, a pertinent point .....

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unts, it was a common point between the parties that similar stand of the Assessing Officer came up for consideration before the Tribunal in assessee s own case for assessment year 2005-06 and vide order in ITA NO.422/Mum/2011 Dated 12/06/2013, the stand of the assessee has been upheld. In this context, we may reproduce hereinafter the relevant portion of the order of the Tribunal dated 12/06/2013(supra), which reads as under:- 8. We observe that the dispute is mainly in respect of taxing the sh .....

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assessee has also stated specifically in the profit and loss account, details of long term capital gain, short term capital gain and speculative dealings in shares, besides showing interest and dividend income by the assessee in the assessment year under consideration. Further, it is also observed that assessee is maintaining separate details in respect of shares, held by the assessee under the head stock-in-trade and shares held under the head investment . Therefore, we find substance in the su .....

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r under consideration. However, on perusal of said statement, placed at pages 24-25 of PB, we observe that there are not repetitive transactions in the same scrips. The department has not disputed the fact that assessee has not used any borrowed funds for the purpose of purchase of shares and same is also fortified on perusal of profit and loss account, that no interest has been claimed towards expenses. The ITAT Mumbai has held in the case of Janak S Rangwala vs ACIT, 11 SOT 627 that mere volum .....

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1.8.2006, copy placed on record, accepted the capital gain shown by the assessee. In the case of Gopal Purohit vs JCIT, 29 SOT 117(Mum), ITAT has held that most crucial source of gathering intention of assessee as regards nature of transaction is the accounts maintained by the assessee. It is further held that delivery based transactions should be treated as investment transactions. The said finding of 7 the Tribunal has been upheld by Hon ble Bombay High Court in the above case reported at 228 .....

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us, department has not accepted the profits shown by the assessee as capital gain, merely on the ground of volume of transactions but has not disputed the manner of showing the shares in its account under the head investment . We are of the considered view that above decisions of ITAT squarely apply to the case of the assessee. Considering the facts of the assessee, we hold that the short term capital gain aggregating to ₹ 10,16,274/- shown by the assessee , be assessed under the head sho .....

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investor in shares, consequently, in the instant year also such a finding is inevitable. The Tribunal in its order dated 12/06/2013 (supra) has noticed that in assessment year 2004-05 the department has itself treated the assessee as an investor in shares while making the assessment under section 143(3) of the Act. Thus, having regard to the history of the case, the action of the income-tax authorities in assessing the gain on sale and purchase of shares and mutual funds as business income is un .....

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claimed that no expenditure was incurred for earning such exempt income and hence no disallowance was made under section 14A of the Act. The Assessing Officer however disagreed with the assessee and computed an expenditure of ₹ 6,24,577/- as relatable to earning of such exempt income by applying the provisions of 14A r.w. Rule -8D of the Income Tax Rules,1962( in short the Rules ). The said disallowance has also been affirmed by the CIT(Appeals), against which the assessee is in appeal bef .....

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