TMI Blog2017 (2) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... tantial compliance of the provisions without there being any explicit assertion about the same. As noted, the affirmative steps by way of SCN on the issue in the first instance tantamount to subsistence of ‘satisfaction’ in the instant case. Hence, in our view, S. 14A as presently codified does not provide impetus on explicit recording of satisfaction per se. The requirement of section would stand addressed when the satisfaction is otherwise discernible in the action of the AO. Applying the aforesaid view in the context, we are of the opinion that requisite satisfaction was subsisting for invoking section 14A and Rule 8D. Consequently, we hold that the objection of the assessee on this score is not sound. - Decided against assessee. Sale of shares and securities which are held for less than 30 days - Short Term Capital Gain(STCGs) OR business income - Held that:- The issue is thus required to be decided as per the facts and the circumstances of the individual case and not having regard to the smaller period of holding alone. As pointed out by the assessee before the CIT(A), the assessee has sold the shares held for less than thirty days in only six instances which in our view do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... major income of the assessee is derived by way of dividend income flowing from investment in shares. Other source of income includes interest income from money advanced to various parties. During the relevant assessment year, the assessee has declared receipt of dividend income to the tune of ₹ 2,70,17,059/- which is exempt from tax. The assessee has shown investment of ₹ 24,38,34,685/- as on 31.3.2008. The Assessing Officer (AO) observed that in view of the tax-free income earned by the assessee, disallowance of indivisible expenditure attributable to dividend income is called for in terms of section 14A read with Rule framed thereon by way of Rule 8D of the income Tax Rules, 1962. He accordingly calculated disallowance as per statutory formula prescribed under Rule 8D of the IT Rules. The aggregate disallowance arrived at ₹ 19,44,064/- inter alia included ₹ 12,19,173/- towards common administrative expenses as per Rule 8D (2)(iii) of the IT Rules. In the first appeal, the CIT(A) while granting relief towards disallowance computed under other limbs, confirmed the disallowance made by AO under third limb for ₹ 12,19,173/-. 5. The relevant operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfavor. 8. The Ld.DR Mr.Prasoon Kabra, on the other hand, submitted with reference to the financial statement that major part of its resources have been applied towards investments. Various expenditure incurred as reflected in Profit Loss Account including professional charges and rent expenses thus necessarily are attributable to the investments yielding exempt income. Therefore, the disallowance has been rightly worked out by applying newly introduced formula prescribed as per Rule 8D of the I.T.Rules. The Ld.DR next contended that the AO has duly issued show cause notice for applying Rule 8D of IT Rules and therefore presence of satisfaction of the AO cannot be brushed aside. The satisfaction of the AO is implicit having regard to the facts and the circumstances of the case notwithstanding that it may not have been reduced in writing in explicit terms. The Ld.DR accordingly contended that the assessee cannot escape the applicability of statutory formula prescribed under rule 8D of the IT Rules. 9. We have considered the rival submissions with regard to objection of the assessee on disallowance of expenditure incurred in relation to dividend income not forming part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is regard. As noted earlier, the Profit Loss Account filed by the assessee also makes its manifest the expenditure noted therein are overwhelmingly attributable to both taxfree and taxable income and remains indivisible. The expression accounts used in section 14A is not confined to books of account but includes financial statements. Thus, there exists adequate and prima facie material to support formation of satisfaction. Therefore, presence of satisfaction contemplated under section 14A having regard to accounts cannot be discredited. It would be pertinent here to say that phraseology employed in section 14A(2) of the Act suggests that what is required to trigger section 14A among others is that AO is not satisfied with the correctness of the claim of the assessee having regard to its accounts. It nowhere indicates that the satisfaction is required to be explicitly reduced in writing. This language employed is not akin to record his reasons employed in section 148(2) of the Act. When seen in the context, such difference in phraseology in the context of different clauses of the Act would permit us to draw inference that the expression is not satisfied is in variance wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... days during the year. 14. In second appeal before the Tribunal, the Ld.AR for the assessee relied upon the facts placed before the CIT(A) and contended that only at six instances, the assessee has derived gains on sale of shares which were held for less than 30 days. Therefore, inference of profit motive cannot be drawn adverse to the assessee. The Ld.AR submitted that the scheme of the Act does not allow artificial bifurcation of capital gains arising on sale of shares on considerations of holding for more than 30 days or less than 30 days. It was contended that the action of the CIT(A) is therefore not sustainable in law. The Ld.AR further submitted that the assessee has inter alia earned Long Term Capital Gains (LTCGs) during the year which has not been called into question. The adversarial action has been taken only with reference to STCGs to simply collect more revenue for the Department. The Ld. AR pointed out that in the earlier assessment year 2005-06, the assessee incurred loss on sale of shares and therefore no SCN was issued while framing the assessment under section 143(3) as it was convenient to the revenue to accept the position declared by the assessee. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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