TMI Blog2016 (8) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee suggest that the funds have been used by the assessee for investment purposes only. We do not found any justification on the part of the lower authorities in treating the assessee as a trader in relation to the share transaction when in the earlier as well as in subsequent year, the assessee has been treated as investor in the shares. We accordingly direct the AO to treat the income of the assessee from share transaction as capital gains and not as business income of the assessee. Disallowance made u/s 14A r.w. Rule 8D - disallowance of expenditure incurred for the purpose of earning the tax exempt income - Held that:- The Hon’ble Delhi High Court in the case of “Chem Investments vs. CIT” (2015 (9) TMI 238 - DELHI HIGH COURT) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying Rule 8D. The Learned CIT(A) erred in facts and circumstances of the case and in law in granting only part relief of additions that the AO made u/s 14A applying Rule 8D. Reasons given by CIT(A) in confirming additions that the AO made by treating SHORT TERM CAPITAL GAIN as BUISNESS INCOME and not granting full relief on additions that the AO made u/s 14A are wrong, insufficient and contrary to facts and evidence on record and in law. Ground No. 1 3. The assessee has raised two effective grounds of appeal. The issue raised in ground no.1 by the assessee is whether the income earned from the sale and purchase of shares is to be assessed as Short term capital gains or as business income. 4. The brief facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, held that the motive of the assessee for purchase of shares was not investment but trading in shares. He accordingly treated the income earned by the assessee from share transactions as business income of the assessee. 5. Being aggrieved by the above action of the AO, the assessee filed appeal before the Ld. CIT(A). In appeal, the ld. CIT(A), vide impugned order, observed that the assessee during the year had done only activities of share transactions and hence share transaction was main business activities of the assessee. The assessee had used the borrowed funds for the purpose of purchasing the shares. The fund position of the assessee from the balance sheet showed that out of total fund of ₹ 18.43 crores, ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business activity of lending and borrowing and surplus borrowed funds were invested in share transaction. That the assessee, otherwise, has its own sufficient capital that the investment was not only made in shares but also in mutual funds and in fixed assets such as landed property where the notice of which earning of profits was not involved but the activities of the assessee suggest that he was an investor. Ld. DR on the other hand has strongly relied upon the findings of the lower authorities and has contended that out of total funds of ₹ 18.43crores, the assessee has ₹ 14.71 as unsecured loans. Thus, the fact reveals that the assessee used the borrowed fund for the purpose of making share transaction. He, therefore, submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ader in relation to share transactions carried out by it. The Hon ble Karnataka High Court in the case of CIT vs. Kanpur Investments Private Limited [2015] 61 taxmann.com 91 (Karnataka) held that the Income Tax Act does not prohibit the assessee from making investments in capital assets after using borrowed funds and that even if the assessee has invested the borrowed funds in share transaction that would not mean that the same would become business activity of the assessee. There is another peculiar fact of the case that there is not repetitive transaction and even the assessee from the income earned from the shares has invested the same in property. The major part of the funds of the assessee being invested either in mutual fund or in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Hon ble Delhi High Court in the case of Joint investments Private Ltd. vs. CIT ITA No. 117/2015 decided on 25.02.2015 and further in the case of ACB India Limited vs. ACIT ITA No.615/Mum/2014 decided on 24.03.2015 to contend that the disallowance under Rule 8D(2)(iii) cannot be made on the basis of entire investments but should be worked out by taking only those investments which yielded dividend during the year. He has further relied in this respect on the decision of the co-ordinate bench of the tribunal in the case of M/s Amrit Diamond Trade vs. ACIT, ITA No.2642/Mum/13 vide order dated 15.01.2016. Ld. DR on the other hand has relied upon the finding of the lower authorities. 9. We have considered rival contentions and have also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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