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2016 (7) TMI 746 - ITAT KOLKATA

2016 (7) TMI 746 - ITAT KOLKATA - TMI - Revision u/s 263 - profit on sale of mutual funds and derivatives to be assessed under the head ‘income from business’ - Held that:- In the instant case, we find that the ld AO had accepted the profit on sale of mutual funds and derivatives to be assessed under the head ‘income from business’ which is also accepted by the ld CIT. The ld AO had allowed the claim of deduction towards keyman insurance premium in the sum of ₹ 2,28,780/- by placing relian .....

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762 dated 18.2.1998 which Circular is actually binding on him. - However, he proceeded to disallow the portion of the claim of depreciation on car as not used for business purposes as assessee had not substantiated the usage of the same for the purpose of business. These facts go to prove beyond doubt that the ld AO had duly applied his mind on the aspect as to whether the assessee had indeed carried on any business during the year or not. It is not in dispute that the ld AO had allowed the .....

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e either way, no prejudice is caused to the interest of the revenue by the order of the ld AO. Hence the twin conditions required for section 263 of the Act are not satisfied. - Decided in favour of assessee. - I.T.A No. 1713/Kol/2013 - Dated:- 15-7-2016 - Shri M. Balaganesh, AM And Shri S. S. Viswanethra Ravi, JM For the Appellant: Shri Subash Agarwal, Advocate For the Respondent: Shri Niraj Kumar, CIT, Sr. DR ORDER Per Shri M. Balaganesh, AM This appeal by assessee is arising out of revision o .....

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as filed by the assessee on 15.11.2006 declaring total income of ₹ 65,831/- after adjusting brought forward business and depreciation loss of ₹ 1,42,209/- under normal provisions of the Act and declaring book profit u/s 115JB of the Act of ₹ 4,52,412/-. The assessment was completed u/s 143(3) of the Act on 3.7.2008 determining the total income 66,672/- under normal provisions of the Act after making disallowance u/s 14A of the Act in the sum of ₹ 841/- and determining the .....

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ial ICICI Asset Management Company Limited. It was also stated by the assessee that the assessee had disclosed the other income earned through PMS other than dividend income, under the head income from business . This plea of business income has been accepted by the ld AO while completing the assessment u/s 143(3) of the Act on 3.7.2008. Later this assessment was sought to be reopened u/s 147 of the Act for the following reasons :- It came to light that claim of assessee on insurance amounting t .....

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car for business purpose as well as in connection with new business venture. However, the ld AO observed that the claim is not fully substantiated that the car was entirely used for business and accordingly made proportionate disallowance of depreciation of ₹ 80,192/- and completed the reassessment u/s 147 / 143(3) of the Act on 30.11.2011. 4. The ld CIT issued show cause notice dated 22.3.2013 seeking to revise the assessment framed u/s 147/143(3) of the Act in as much as the ld AO had g .....

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06 relevant to Asst Year 2006-07, it had earned profit on sale of units of mutual fund of ₹ 1,40,176/- and profit on sale of derivatives of ₹ 16,950/- through portfolio management scheme (PMS) of Prudential ICICI Asset Management Company Limited which are purely business income of the assessee and assessed as such in the original 143(3) proceedings by the ld AO. Even in the reassessment proceedings the ld AO sought to only disallow proportionate depreciation on car as used for perso .....

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; commission, interest paid to bank, travelling & conveyance , printing and stationery, repairs and maintenance, building repairs and maintenance, miscellaneous expenses, postage & stamps, rent, auditor s remuneration, car running & maintenance, stock exchange annual fees, trade licence & profession tax, legal expenses, licence & fees, filing fees, insurance, rates & taxes, electricity & water, books & periodicals, consultancy fees and securities transaction tax , .....

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8,780/- and remaining depreciation on assets in the sum of ₹ 59,228/-. We find that he did not bother to disturb either the business income in the form of profit on sale of mutual funds and derivatives to be treated as capital gains. Similarly we find that the ld CIT did not bother to disturb the grant of deduction of administrative expenses as detailed supra other than keyman insurance premium and depreciation on assets. We find that the ld CIT himself had partially allowed certain admini .....

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to be erroneous warranting revisionary jurisdiction u/s 263 of the Act. It is not the case of the revenue that the profit on sale of mutual funds should not be treated as business income during the year under appeal. Similarly it is not the case of the revenue to treat the profit on sale of derivatives should not be treated as business income during the year under appeal. It is already well settled that transactions in derivatives would always be construed only as business transactions as the sa .....

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funds for and on behalf of their clients. The ld AR vehemently argued that the profit derived from sale of units of mutual fund through PMS is only business income which has been rightly considered as such by the ld AO in the original assessment as well as in reassessment proceedings and there was no error committed by the ld AO thereon. In this regard, we find that the reliance placed by the ld AR on the decision of Co-ordinate Bench of Delhi Tribunal in the case of M/s Radials International vs .....

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ive to maximize profit and not with a view to hold them as investment. The volume of the transaction is very high. All these facts indicate that the portfolio manager had in fact done trading on behalf of the assessee. There is no difference between similar transactions carried out by an individual in shares and the transactions carried out by portfolio manager. Such transactions can be compared with trading in commodities or real estate. If an assessee gives money to a property dealer with the .....

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he answer is no. Therefore, in our considered opinion, the profits arising on purchase and sale of shares are in the nature of business and not as investment. Merely because the purchase and sale of shares had occurred through DEMAT account on delivery based; it would not change the nature of the transaction. Since the portfolio manager in the capacity of an agent has traded in shares on behalf of the assessee, the profits arising therefrom will be in the nature of business profits. Further simp .....

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see has no control or say as to when and the type of shares or the period of holding of the shares. Therefore, in our considered opinion, the transactions are in the nature of business. The decision relied upon by the assessee in the case of Gopal Purohit (supra) is not applicable to the facts of the assessee's case. 5.1. The jurisdiction of the ld CIT u/s 263 of the Act can be exercised only when he finds that the order of the ld AO which is sought to be revised u/s 263 of the Act was erron .....

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ted by the ld CIT. The ld AO had allowed the claim of deduction towards keyman insurance premium in the sum of ₹ 2,28,780/- by placing reliance on the CBDT Circular No. 762 dated 18.2.1998 which is binding on him. In fact, we find that the ld AO though had reopened the assessment initially on the pretext that there was no business carried on by the assessee and accordingly keyman insurance premium and depreciation are not allowable business expenditure, was thoroughly convinced on the fact .....

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ect as to whether the assessee had indeed carried on any business during the year or not. It is not in dispute that the ld AO had allowed the claim of other administrative expenses as allowable business expenditure. Hence it could be safely concluded that the ld AO had indeed made requisite enquiry in the given set of facts and circumstances of the case and had taken a judicious view on the entire issue. Hence his order cannot be termed as erroneous within the meaning of section 263 of the Act. .....

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#39; has to be read in conjunction with an erroneous order passed by the A.O. Every loss of revenue as a consequence of an order of A.O. cannot be treated as prejudicial to the interest of the revenue. It was further held that if the A.O. has adopted one of the courses permissible in law or where two views are possible and the A.O. has taken one view with which CIT does not agree, the order cannot be treated as erroneous and prejudicial to the interest of the revenue unless the view taken by the .....

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