TMI Blog2016 (7) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... plicable but since administrative and personal expenses must have been incurred to earn exempt income, determined the disallowance at ₹ 63,352/-. Having heard both the parties, we do not find any reason to interfere with the order of ld. CIT(A) on this count, as he has made a reasonable disallowance of 5% of the expenditure incurred under the head administrative and personal expenses - Decided against revenue Addition of deemed dividend u/s 2(22)(e) - Held that:- Admittedly, the assessee was not a shareholder of Radhika Securities Pvt. Ltd. and, therefore, no deemed dividend could be added in the hands of the assessee company. Accordingly, we see no reason to interfere with the order of ld. CIT(A) in deleting the addition - Decided against revenue - ITA Nos. 1563/Del/2010, 1279/Del/2011, 1747/Del/2011 - - - Dated:- 30-6-2016 - Shri S. V. Mehrotra : Accountant Member And Smt. Beena A. Pillai: Judicial Member For the Appellant : Shri Rajesh Kumar Sr. DR For the Respondent : Shri Sanjay Agrawal CA ORDER Per S. V. Mehrotra, A. M These are revenue s appeals against separate orders of the ld. CIT(A)-XV, New Delhi relating to AY 2005-06 to 2007-08. All th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital gains from share trading, which shows that shares had been purchased for short term also. He further referred to the audit report filed by the assessee u/s 44AB, wherein also the business of the assessee was stated to be purchase, acquire, hold and dispose off or otherwise investment in shares, debentures, stocks, bonds, obligations and securities . The AO further pointed out that perusal of the P L a/c shows that the assessee had primarily derived its income from speculative trading of shares and delivery based trading of shares. He noted that the long term capital gain was shown in respect of sale of scrip in Rasandik Engineering Industries India Ltd. amounting to ₹ 98,41,195/-. AO further observed that it is scrip in which the assessee had also done non- delivery based speculative trading and declared speculation profits on the same. He, therefore, concluded that since the assessee itself had declared business income from the trading in the shares of Rasandik Engineering Industries India Ltd., the claim of the assessee that it derived long term capital gain from the same scrip could not be accepted. He, accordingly, treated the entire capital gains as business income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 841032 17098334.00 8. Further, it was pointed out that the investment in shares had been made out of own funds and not from any borrowings. The details of income, investment, loan given and taken over the year was also given, which is reproduced hereunder: Year Income Profit Before tax Investment Loan Given Loan taken 2001-02 3828538.00 1564718.00 00.00 3225000.00 350000.00 2002-03 4149062.00 3961157.00 7529757.00 00.00 750000.00 2003-04 5297581.00 5143350.00 8484287.00 150000.00 750000.00 2004-05 12852886.00 12430877.00 17098334.00 00.00 00.00 9. Ld. counsel further relied on the CBDT Circular no. 6 dated 29.2.2016, wherein it has been, inter a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in CIT Vs. Darius Pandole [(2011) 330 ITR 485 (Born.)} has held that income from sale of shares treated as business income in earlier years by way of assessment u/s 143(3) cannot be taken as capital gain in subsequent year. The essence of the judgment is that the principle of consistency should be followed and the parties should not be allowed to register departure from the existing position time and again. In the like manner, the Hon'ble Bombay High Court in CIT VS. Gopal Purohit (2011) 336 ITR 287 (Born) has held income from shares as Business income on the basis of the rule of consistency. Since, the view taken by the Assessing Officer on similar issue has been reversed by the ld. CIT(A) and no material has been brought on record by the Id. DR to demonstrate that the Tribunal tinkered with such view canvassed by the ld. first appellate authority for the earlier years, respectfully following the above precedents of the Hon'ble Bombay High Court, we uphold the impugned order on this score. 11. He, therefore, submitted that profit on sale of shares returned by assessee should be assessed as long term/ short term capital gain as returned. 12. We have considered th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in dematerialized form. The sales from the demat accounts are recognized on First in First out (FIFO) basis. 5. The copies of demat accounts are enclosed to show the long-term holding of the shares. 6. The opening balance of holding in Rasandik Engineering Industries India Ltd. shares was 814396 equity shares on 01- 04- 2004. The same were dematerialized as under:- Opening as on 01.04.04 in demat account 39,696 20.09.04 - dematerialized 1,600 23.09.04 - dematerialized 2,50,000 24.09.04- dematerialized 5,23,100 8.14.396 During the year 2004-05 the company had purchased 1,84,523 shares on long-term basis which were credited to demat account. 7. The company sold 1,61,137 shares from the opening balance through stock exchange and has claimed exemption u/s 10(38). 8. The company was allotted 3200 shares on forfeiture. 9. It also sold 2000 shares on off market basis under Proviso to section 112(1). 10. Other sales were 325 shares. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting to ₹ 37,93,206/-. The AO has further noticed as under: The perusal of the details filed by the assessee In respect of its claim of long term capital gains shows that the gain of ₹ 9841195/- has basically been derived from the sale of the scrip - Rasandik Engineering Industries India Ltd. It is the same scrip in which the assessee has also done non-delivery based speculative trading and declared speculation profits on the same. Therefore, when the assessee has itself declared business income from the trading in the shares of Rasandik Engineering Industries India Ltd., the claim of the assessee that it has derived long term capital gains from the same scrip cannot be accepted. Thus, the entire gains derived by the assessee from the purchase and sale of shares is held to be business income of the assessee . 21. Thus, the facts in the present assessment year as regards ground no. 3 are similar to the facts as obtaining in AY 2005-06. Therefore, for the reasons Therefore, for the very same reasons as in AY 2005-06, s above, we uphold the action of ld. CIT(A) on the issue in question. Ground is dismissed. 22. Apropos ground no. 2, facts in brief are that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is the same scrip in which the assessee has also done non-delivery based speculative trading and declared speculation profits on the same. Therefore, when the assessee has itself declared business income from the trading in the shares of Rasandik Engineering Industries India Ltd., the claim of the assessee that it has derived long term capital gains from the same scrip cannot be accepted. Thus, the entire gains derived by the assessee from the purchase and sale of shares is held to be business income of the assessee. 30. He, accordingly, treated the profit on sale of shares as business income. Ld. CIT(A) following the order for AY 2005-06, allowed the assessee s claim. Thus, the facts in the present assessment year, as regards ground no. 2, are similar to the facts as obtaining in AY 2005-06. Therefore, for the very same reasons as in AY 2005-06, above, we uphold the action of ld. CIT(A) on the issue in question. Ground is dismissed. 31. Apropos ground no. 1, facts in brief are that the AO noticed that assessee had declared dividend income of ₹ 8,87,929/-. He show caused the assessee regarding applicability of section 14A. After considering the assessee s reply, ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to in Sec.2(22)(e) refers to both a registered shareholder and beneficial shareholder. If a person is a registered shareholder but not the beneficial shareholder than the provisions of Sec.2(22)(e) will not apply. Similarly if a person is a beneficial shareholder but not a registered shareholder then also the provisions of Sec.2(22)(e) will not apply. 37. Ld. CIT(A), thus, concluded as under:- Perusal of the provisions of section 2(22)(e) and the judicial decisions cited above show that deemed dividend will be taxed in the hands of the share holder. In the instant case since the appellant was not a share holder of the company, therefore, the assessment of the deemed dividend in the hands of the appellant was not correct. In view of the findings above and judicial precedents on the subject, this ground of appeal is allowed in favour of the appellant. 38. Ld. counsel pointed out that now this issue is also concluded by the decision of Hon ble Delhi High Court in the case of CIT Vs. Ankitech P. Ltd. (2012) 340 ITR 14 (Delhi), holding that loan received by assessee company from another company persons having substantial interest in assessee company and company ..... X X X X Extracts X X X X X X X X Extracts X X X X
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