TMI Blog2019 (1) TMI 1780X X X X Extracts X X X X X X X X Extracts X X X X ..... Dated:- 2-1-2019 - Shri Amit Shukla, Judicial Member And Prashant Maharishi, Accountant Member For Revenue : Shri Surender Pal, Sr. DR For Assessee : Shri M.P. Rastogi, Advocate ORDER Amit Shukla, The aforesaid appeal has been filed by the revenue against the impugned order dated 3.11.2014, passed by Ld. CIT (Appeals)-XVII Delhi for the quantum of assessment passed u/s 143(3) for the assessment year 2010-11. In the grounds of appeal revenue has raised following grounds: - 1. The Ld. CIT(A) erred on facts under the circumstances of the case in treating the loss of ₹ 2300136/- as long-term capital loss and ₹ 17393856/- as short term capital gain by following the decision of CIT(A) s on Principal of consistency. 2.1 The Ld. CIT(A) erred in law and on the facts in deleting the disallowance u/s 14A read with Rule 8D amounting to ₹ 38,19,939/- without appreciating the facts that the assessee failed to prove the nexus of interest free fund and investment made during the year before the AO. 2.2 The Ld. CIT(A) erred in law and on the facts in deleting the disallowance u/s 14A read with rule 8D(ii) following the decision of the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 15,41,96,869/- The assessee company is a NBFC, which was also in the business of sale and purchase of shares and mutual fund. In so far as transactions in mutual funds are concerned, the same has been offered under the head Profits and Gains of Business and Profession . However, various shares which has been held under the investment portfolio on which assessee has been shown under the head Long-Term Capital Gain and Short-Term Capital Gain as per the details incorporated above. The income earned by the assessee from various sources was as under: - Particulars Asset Type Amount Income from Business (A) a)Trading in units of Mutual Funds; b) Income from Interest; c) Incentive and Miscellaneous Income 360,77,965 Income from Capital Gains (B) Income from Capital Assets Investment in Equities LTCG-11,48,78,740 (85%) STCG-2,02,28,220 (15%) 13,51,06,960 Income from other Sources (C) Dividend earned from investment in equities 8,19,14,172 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove that this was an investment held by the assessee. Similarly, in the case of ABN Amro Bank they were always held as investment and since the stock was not a tradeable in the stock market, therefore it could have been held as stock for the purpose of trade. Thus, the shares of ABN Amro Bank can never be treated as acquired for trading purpose. Hence any gain arising from sake of these two shares has to be assessed as capital gain . 16. Further, from the perusal of details shown under LTCG of other scrips also, we find that the same have been acquired in the years 2005, 2006 and 2007 and were treated as part of investment and the holding days of these shares are ranging from 372 days to 828 days. These shares were not converted from stock as on 01.04.2004, because they have been acquired in the later years and from the date of acquisition, always been kept as investment in the books and later on sold after more than a year on which gain has been shown under the head Long Term Capital Gain . Nowhere it has been laid down that the assessee who is dealing in shares cannot maintain two separate portfolios, one for the trading purpose and other for the investment purpose and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but with the dominant intention of resale in order to earn profits; the profit made by them is not of mere enhancement of value of the shares, but is a profit made in the carrying on of a business scheme of profit making; huge volume of share transactions, the repetition and continuity of the transactions, give them a flavour of trade ; the magnitude, frequency and the ratio of sales to purchases on the total holdings is evidence that the assessee had not purchased the shares as an investment, but with the intention to trade in such scrips. In the light of view taken in the aforesaid decisions, including in Wallfort Financial Services Ltd.(supra) relied upon by the Id. DR, we are of the opinion that the Id. CIT(A) was not justified in accepting the claim of the assessee as investor in shares especially when the nature of transactions in the years under consideration was similar to what the assessee had undertaken hither to and turnover of the assessee continually increased in the years under consideration. Accordingly, we vacate the findings of the Ld. CIT (A) and restore the order of the AO. Therefore, ground no.1 in these appeals is allowed. If the aforesaid ratio and pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s.10(38) 1,06,78,21,147 Long Term Capital Gain on sale of shares of Punjab Tractors ltd. 10,13,29,232 Long Term Capital Gain on sale of shares of ABN Amro Securities Pvt. Ltd. 2,93,99,990 Short Term Capital Gain 2,02,28,140 Total 1,21,87,78,509 17. Now, it has been well settled that if the shares which has been acquired and treated as investment from day one and held for more than a year, then sale of such shares has to be taxed under the head Long Term Capital Gain . This has been clarified by the CBDT in its following two circulars: - Circular No.6/2016; dated 29/02/2016 Sub: Issue of taxability of surplus on sale of shares and securities - Capital Gains or Business Income - Instructions in order to reduce litigation - reg.- Sub-section (14) of Section 2 of the Income-tax Act, 1961 (Act') defines the term capital asset to include property of any kind held by an assessee, whether or not connected with his business or profession, but does not include any stock-in-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent Assessment Years also and the taxpayers shall not be allowed to adopt a different/contrary stand in this regard in subsequent years; c) In all other cases, the nature of transaction (i.e. whether the same is in the nature of capital gain or business income) shall continue to be decided I.T.A. No.3078/Del/2011, 820/Del/2013 5054/Del/2015 23 keeping in view the aforesaid Circulars issued by the CBDT. 4. It is, however, clarified that the above shall not apply in respect of such transactions in shares/securities where the genuineness of the transaction itself is questionable, such as bogus claims of Long-Term Capital Gain / Short Term Capital Loss or any other sham transactions. 5. It is reiterated that the above principles have been formulated with the sole objective of reducing litigation and maintaining consistency in approach on the issue of treatment of income derived from transfer of shares and securities. All the relevant provisions of the Act shall continue to apply on the transactions involving transfer of shares and securities. 17.1 Later on CBDT again clarified in the following manner:- F. No. 225/12/2016/ITA.II Government of India Ministry of Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal in assessee s own case in the A.Y. 2011-12 has decided the issue in favour. Apart from that, there are many judgments now including that of Hon ble Jurisdictional High Court rendered after the judgment of Tribunal order for the earlier years (supra), wherein it has been consistently held that if the shares have been held under the portfolio of investment which is separate from the I.T.A. No.3078/Del/2011, 820/Del/2013 5054/Del/2015 25 shares then same cannot be brought to tax under the head capital gain. Some of the judgments are as under: - 1. CIT vs. Gopal Purohit, 336 ITR 287 (Bom.) [Also confirmed by Hon ble Supreme Court] 2. CIT vs. Vinay Mittal, 208 taxman 106 (Del. HC) 3. ITO vs. Rohit Anand, (2009) 34 SOT 42 (Del.) 4. CIT vs. Amit Jain, 374 ITR 550 (Del.) 5. CIT vs. Sahara India Housing Corporation Ltd., ITA No.740/2009 (Del.) 18. In the light of the catena of decision Hon'ble Jurisdictional High Court and also some of the judgment affirmed by the Hon'ble Supreme Court and the facts as discussed above, the earlier years Tribunal order cannot be held to have any binding precedence and accordingly, we hold that in so far as transaction i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussed by the Assessing Officer also and moreover if I.T.A. No.3078/Del/2011, 820/Del/2013 5054/Del/2015 27 the entire issue of Long-Term Capital Gain, whether assessable under the head capital gain or business income is in dispute and if certain facts are being pointed out from the material already on record, then the same can always be examined to see, whether it was acquired for the purpose of investment or for the purpose of trading. Thus, objection raised by the ld. CIT-DR is rejected. 5. Thus, respectfully following the precedents of the earlier years and as a principle of consistency, we uphold the order of the CIT(A) that long term capital gain/capital loss cannot be treated as business income or loss and also long-term capital gain cannot be treated as business income. Accordingly, ground No. 1 raised by the revenue stands dismissed. 6. In so far as second issue relating to disallowance u/s 14A read with rule 8D is concerned, Ld. Counsel submitted that this issue too is covered in favour of the assessee, because there is a categorical finding that assessee has made investment in the shares and mutual funds out of surplus funds which is evident from the fact t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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