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II. Case laws - Direct Tax:
1. M/s
Management Structure & Systems Pvt. Ltd. Vs. ITO, ITA No.
6966/Mum/2007, Date of pronouncement: 30.04.2010, ITAT - Mumbai
Whether
the income from trading of shares would constitute business income
merely on the business that the assessee had profession knowledge of the
market?
Held: No
Points of determination
•
It is well settled principle as has held in the case of H. Holsck
Larzen (supra) that whether the activity of buying and selling of the
shares is in the nature of trade and investment. It is a mixed question
of law and fact.
•
Perusal of Balance Sheet filed by the assessee and the books of
account stated that the assessee has treated the entire investment in
the shares as an investment only and not as a stock in trade.
•
Another important aspect to be considered here is the assessee is not a
share broker nor he is having a registration with any Stock Exchange.
•
Some scripts are held for more than five years and there was no
derivative transactions by the assessee, also the case is not that where
the transactions was without delivery.
•
The intention of the assessee cannot be read from his mind but it
reflects in its conduct, the way he treats the transactions.
•
The assessee has not borrowed any money for investing in shares and
used his own surplus funds and these facts have not been disputed by the
A.O. The proposition has been accepted by the Board also in Circular
No. 4/ 2007 that the assessee is entitled to maintain two portfolios.
•
In the preceding years, the assessee is consistently declaring the
gain/profit on the sale of the shares under the head ‘Capital Gain'
either Long Term and Short Term and the same has been accepted by the
A.O.
•
It is true that the rule of res judicata is not applicable to the
Income Tax Proceedings, but at the same time, it is also well settled
principles that if there is no change in the facts, then, there should
be consistency in the approach of the Revenue authorities while deciding
the tax liability of the assessee.
(Please click here for judgment)
2. Dy. CIT Vs. Ashish Jhunjhunwala, ITA No: 1809/Kol/2012, Date of pronouncement: 14.05.2013, ITAT - Kolkata
The
assessee earned income by way of dividend. During the assessment u/s
143(3) of the Income Tax Act, 1961. The AO asked the assessee for the
details of expenditure incurred for earning the exempted income
(dividend income). The assessee contended that no expenditure was being
incurred for earning the dividend income. On being dissatisfied with the
assessee contention the AO invoked Rule 14A read with rule 8D and made
the addition of Rs. 3,243,23/-.
On
appeal by the department before Tribunal, the Tribunal affirmed the
decision of CIT (A), that once 100% of expenses amounting to
Rs.1,95,483/- claimed by him under the head Income from Other Sources
has been disallowed separately by the AO, there is no reason to make any
further disallowance of expenditure u/s. 14A of the Act i.e., and as
such hon’ble ITAT pronounced in favor of assessee under a view that the
AO has not considered the claim of the assessee and straight away
embarked upon computing disallowance under Rule 8D of the Rules on
presuming the average value of investment at ½% of the total value
following the following the coordinate bench decision in the case of J.
K. Investors (Bombay) Ltd., ITA No.7858/Mum/2011, AY 2008-09 dated
13.03.2013.
(Please click here for judgment)
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