The DCIT, Circle-8, Ahmedabad V. Shri Mayur Mukundbhai Desai, Ahmedabad

ITA 2017/AHD/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8123 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 29-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Salary income; Transactions in derivatives; Earning of tax free income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA.NO.2017/AHD/2013 / ASSTT. YEAR: 2010-11 DCIT, CIR.8 AHMEDABAD. VS SHRI MAYUR MUKUNDBHAI DESAI A/1, MAHARAJA COMPLEX OPP. RASRANJAN NR. VIJAY CROSS ROADS NAVRANGPURA, AHMEDABAD. PAN : AELPD 7897 M ! / (APPELLANT) '# ! / (RESPONDENT) REVENUE BY : SHRI PRASOON KABRA, SR.DR ASSESSEE BY : NONE / DATE OF HEARING : 07/11/2017 / DATE OF PRONOUNCEMENT: 16/11/2017 $%/ O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER: THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST ORDER OF THE LD.CIT(A)-XIV DATED 27.5.2013 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: 1. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV , AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.9,23,637/- OUT OF TOTAL DISALLOWANCE OF RS.11 ,01,769/-MADE U/S.14A, R.W.R. 8D. 2. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV , AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN TREATING THE PROFIT ON SALE OF SHARES AS LONG TERM CAPITAL GAIN ONLY INSTEAD OF BUSINESS INCOME TREATED BY THE ASSESSING OFFICER IGNORING THE FACT! THAT ASSESSEE WAS ITA NO.2017/AHD/2013 2 ENGAGED IN BOTH F&O AND CASH SEGMENT OF EQUITY MARK ET UTILIZING INTEREST BEARING BORROWED FUND. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 4. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD . COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, AHMEDABAD MAY BE SET-A-SI DE AND THAT OF THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 2. FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAG ED IN THE BUSINESS OF TRANSPORT AND SHARE TRADING. IT IS SEEN THAT THE A SSESSEE HAS MADE VARIOUS INVESTMENTS IN THE SHARES OF INDIAN COMPANIES. THE ASSESSEE HAS RECEIVED DIVIDEND OF RS.24,30,008/- FROM THE INVESTMENTS WHI CH IS EXEMPT U/S.10 OF THE ACT. THUS, THE ASSESSEE HAS EARNED HUGE AMOUNT OF EXEMPTED INCOME BY WAY OF INVESTMENTS OF SUBSTANTIAL FUNDS IN THE SHAR ES AND OTHER INVESTMENTS. THEREFORE, DISALLOWANCE U/S.14A R.W.R. 8D WAS CLEAR LY WARRANTED. THE INVESTMENT MADE BY THE ASSESSEE IN THE BEGINNING OF THE YEAR WAS OF RS.10,00,14,214/- ON 1.4.2008 AND INVESTMENT AT THE CLOSE OF THE YEAR AS ON 31.3.2010 WAS OF RS.27,66,50,661/-. THUS, THE ASSE SSEE WAS ASKED TO SHOW CAUSE AS TO WHY DISALLOWANCE U/S.14A SHOULD NOT BE MADE AS THE ASSESSEE IS IN RECEIPT OF EXEMPT INCOME. IN RESPONSE TO THE SAID N OTICE, THE ASSESSEE FILED SUBMISSION, WHICH IS REPRODUCED AS UNDER: '1, YOUR GOOD SELF HAS ASKED FOR WORKING OF DISALLO WANCE U/S. 14A. IN THIS RESPECT, WE WOULD LIKE TO BRING TO YOUR NOT ICE THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE WHICH IS ATTRIBUTABLE TO E XEMPT INCOME. HOWEVER, BEFORE ASSERTING THAT WE WOULD LIKE TO BRING TO YOU R NOTICE THE PROVISIONS OF SECTION 14A WHICH IS AS UNDER: 14A(1) : FOR THE PURPOSES OF COMPUTING TOTAL INCOME UNDER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITUR E INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF T OTAL INCOME UNDER THIS ACT. ITA NO.2017/AHD/2013 3 (2): THE ASSESSING OFFICER SHALL DETERMINE THE AMOU NT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER THIS ACT. IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESC RIBED (AS PER RULE 8D), IF THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNT S OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FO RM PART OF THE TOTAL INCOME OF THE ACT. (3): THE PROVISIONS OF SUB SECTION (2) SHALL ALSO A PPLY IN RELATION TO A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BE EN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTA L INCOME UNDER THIS ACT. IN THIS REGARD IT IS SUBMITTED THAT: I. THE ASSESSEE IS HAVING TAX FREE INCOMES, IN THE FOR M OF DIVIDEND OF RS.24,30,808/-. THE ASSESSEE HAS NOT INCURRED ANY E XPENDITURE RELATED TO THE BORROWING I.E. INTEREST ON THE FUNDS INVESTE D IN THE SHARES. THE INVESTMENT IS MADE OUT OF OWN CAPITAL, INTEREST FRE E FUNDS OR OUT OF SALE OF OLD INVESTMENTS. IT IS SUBMITTED THAT INTEREST OF RS. 1,64,075/- IS PAID FOR CAR LOAN & TANKER LOAN TO RELIANCE CAPITAL LTD. & HDFC BANK. AGAINST THIS EXPENSE THE ASSESSEE IS HAVING CAR RENT INCOME OF RS. 6,90,000/- AND TRANSPORT INCOME OF RS.1,14,63,546/-. THUS THE INTEREST IS PA ID FOR SPECIFIC ASSETS, WHICH IS ATTRIBUTABLE AGAINST CAR RENT INCOME & TRA NSPORT INCOME; HENCE, NO DISALLOWANCE CAN BE MADE FOR THE PURPOSE OF RULE 8D R.W.S. 14A. INTEREST OF RS. 2,82,290/- WAS PAID FOR HOUSING LOAN, WHICH IS NOT ATTRIBUTABLE TO ANY INVESTMENT; HENCE, NO DISALLOWA NCE CAN BE MADE FOR THE PURPOSE OF RULE 8D R.W.S. 14A. LOAN INTEREST EXPS. OF RS. 58,24,315,32/- IS PAID F OR INVESTMENT IN DEBENTURES FROM WHICH INTEREST INCOME OF RS. 82,58,554/- IS EARNED; HENCE, NO DISALLOWANCE CAN BE MADE FOR THE PURPOSE OF RULE 8D R.W.S. 14A. THE ASSESSEE IS PERSONALLY LOOKING AFTER THE INVESTMENT ACTIVITY AND THERE IS NO EXPENDITURE INCURRED BY HIM ON THIS ACCOUNT. SO THE METHOD PROVIDED UNDER RULE 8D(2)(III) IS NOT APPLICABLE, AS THERE I S IN FACT NO EXPENDITURE OF SUCH NATURE CLAIMED BY THE ASSESSEE IN PROFIT & LOS S A/C AGAINST ANY EXEMPT INCOME. THE BREAKUP OF EXPENSES CLAIMED IN P ROFIT & LOSS A/C ARE AS UNDER: NATURE OF EXPENSE AMOUNT GENERAL EXPENSE EXPLANATION BANK CHARGES 2,821.00 2,821.00 OF GENERAL NATURE ITA NO.2017/AHD/2013 4 DEPRECIATION 17,83,146.00 0 ON CAR, TANKER & OFFICE EQUIPMENT RELATED TO TANKER BUSINESS E TDS FEES 30.00 30.00 OF GENERAL NATURE FINANCE CHARGES 1,64,075.00 0 RELATED TO CAR RENT INCOME & TRANSPORT BUSINESS INCOME HOUSE LOAN INTEREST 2,82,290.00 0 FOR HOUSING LOAN LIC PREMIUM 24,895.00 0 DISALLOWED IN ITR OFFICE REPAIRING EXPS. 10,500.00 10,500.00 OF GENERAL NATURE INTERNET EXPS. 9,927.00 9,927.00 OF GENERAL NATURE LEGAL FEES 12,500.00 12,500.00 OF GENERAL NATURE PROFESSIONAL FEES 19,854.00 19,854.00 OF GENERAL NATURE PROFESSIONAL TAX 2,400.00 0 CLAIMED AGAINST SALARY INCOME STAFF SALARY 1,22,500,00 1,22,500.00 OF GENERAL NATURE STT CHARGES 50,495.00 0 DISALLOWED U/S. 8D(2) TDS LATE DEPOSIT INTEREST 38.00 0 DISALLOWED IN ITR VEHICLE REPAIRING EXPS. 16,785.00 O CLAIMED AGAINST CAR RENT INCOME VEHICLE INSURANCE EXPS. 1,08,741.00 0 CLAIMED AGAINST CAR RENT INCOME TOTAL: 26,10,997.00 1,78,132.00 THUS, THE TOTAL GENERAL EXPENSE CLAIMED IN PROFIT & LOSS A/C IS RS.1,78,132/- WHICH ARE MAINLY TOWARDS TANKER BUSINESS. MOST OF THE OTH ER EXPENSES ARE OF SPECIFIC NATURE AND HAS NO RELEVANCE TO EARNING TAX FREE INC OME. IV. WITHOUT PREJUDICE TO OUR ABOVE SUBMISSION, FUR THER IT IS SUBMITTED THAT IT IS SETTLED LAW THAT IF NO EXPENDITURE IS CLAIMED THERE CANNOT BE ANY DISALLOWANCE. IN THIS REGARD, THE ASSESSEE MOST RES PECTFULLY RELIES ON THE ITA NO.2017/AHD/2013 5 RATIO LAID DOWN BY THE HON'BLE P&H HIGH COURT IN THE CASE OF CIT V. WINSOME TEXTILES IND. LTD. 329 ITR 204 (P & H) PAGE NO. 37 TO 39). IN THIS CASE THE HON'BLE HIGH COURT HAS HELD ' ' I. 'SINCE IN THIS CASE, THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE FOR MAKING INVESTMENT IN THE PURCHASE OF SHARES IN WINSOME YARNS LTD., NO DISALLOWANCE IS WARRANTED U/S. 14A. WE THE REFORE FIND NO JUSTIFICATION TO INTERFERE WITH THE ORDER OF CIT(A) IN HAVING DELETE D THE DISALLOWANCE. THE GROUND OF APPEAL RAISED BY TH E REVENUE IN THIS REGARD IS THUS DISMISSED.' V. THE ASSESSEE ALSO RELIES ON THE RATIO LAID DOW N BY THE P & H HIGH COURT IN THE CASE OF CIT V. HERO CYCLES LTD. 323 ITR 518(P & H)PAGE NO. 34 TO 36. IN THIS CASE THE HON 'BLE HIGH COURT HELD THAT: I. '4. IN VIEW OF FINDING REPRODUCED ABOVE, IT IS CLEAR THAT THE EXPENDITURE ON INTEREST WAS SET OFF AGAINST THE INCOME FROM INTERE ST AND THE INVESTMENTS IN THE SHARES WERE OUT OF THE DIVIDEND PROCEEDS. IN VI EW OF THESE FINDING OF FACT, DISALLOWANCE U/S. 14A WAS NOT SUSTAINABLE. WH ETHER, IN A GIVEN SITUATION, ANY EXPENDITURE WAS INCURRED, WHICH WAS TO BE DISALLOWED, IS A QUESTION OF FACT. THE CONTENTION OF THE REVENUE THA T DIRECTLY OR INDIRECTLY SOME EXPENDITURE IS ALWAYS INCURRED WHICH MUST BE D ISALLOWED U/S 14A AND THE IMPACT OF THE EXPENDITURE SO INCURRED CANNO T BE ALLOWED TO BE SET OFF AGAINST THE BUSINESS INCOME J WHICH MAY NULLIFY THE MANDATE OF SECTION 14A. CANNOT BE ACCEPTED. DISALLOWANCE U/S 14A REQUIRES FINDING OF INCURRING OF EXPENDITURE; WHERE IT IS FOUND THAT FO R EARNING EXEMPTED INCOME NO EXPENDITURE HAS BEEN INCURRED, DISALLOWAN CE U/S 14A CANNOT BE STAND. IN THE PRESENT CASE FINDING ON THIS ASPECT, AGAINS T THE REVENUE, IS NOT SHOWN TO BE PERVERSE, CONSEQUENTLY, DISALLOWANC E IS NOT PERMISSIBLE.' VI. WITHOUT PREJUDICE TO OUR CLAIM THAT NO EXPENDI TURE IS INCURRED IN EARNING EXEMPTED INCOME, THE ASSESSEE FURNISHES THE WORKING AS PER RULE 8D AS UNDER: PARTICULARS AMOUNT AMOUNT RULE8D(2)(I) 50,495.00 RS. NIL, AS THIS AMOUNT IS ALREADY DISALLOWED BY THE ASSESSEE IN COMPUTATION OF INCOME. THE AMOUNT OF EXPENDITURE DIRECTLY RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME RULE 8D(2)(II) EXPENDITURE INCURRED BY WAY OF INTEREST DURING THE P.Y. WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT BUT DIRECTLY OR INDIRECTLY RELATION TO EARNING EXEMPT INCOME. ITA NO.2017/AHD/2013 6 AS PER FORMULA A X B/C A. EXPENDITURE BY WAY OF INTEREST OTHER THAN THE AMOUNT OF INTEREST INCLUDED IN CLAUSE 1 INCURRED DURING THE P.Y. (SEE POINT NO. 3 (II) ABOVE). B1 . THE AVERAGE VALUE OF INVESTMENT, INVESTMENT AS ON 31/03/2009 (OTHER THAN LIC RS. 1,00,000 & PPF RS. 12,38,83 1 & 1 SHARE APPLICATION MONEY RS. 1,72,00,000 & RS. 3,10,000) 8,11,65,384.00 B2. THE AVERAGE VALUE OF INVESTMENT, INVESTMENT AS ON 3 1/03/2010 (OTHER THAN LICRS. 1, 10,000 &PPFRS. 14,13,071 & SHARE APPLICATION MONEY RS. 2,02,00,000 & RS. 3, 10,000) 25,46,17,590.00 B. AVERAGE VALUE OF INVESTMENT (8, 11,65,384+25, 46, 17, 590) / 2 = 16,78,91,487.00 CL. TOTAL ASSETS ON 31/03/2009 15,84,81,445.00 C2. TOTAL ASSETS ON 31/03/2010 41,29,04,903.00 C. AVERAGE VALUE OF TOTAL ASSETS (15,84,81,445+ 41, 29,04,903) 72 = 28,56,93,774.00 NOW,AXB/C= OX 16,78,91,487 / 28,56,93,174= 0 RULE 8D (2) (III) 0.5 % OF AVERAGE INVESTMENT (B) I.E. 0.5 % X 16,78,91,487.00 = 8,39,457.00 HOWEVER ABOVE MAY KINDLY BE RESTRICTED TO RS. 18,000 I.E. 10% OF GENERAL EXPENSE OF RS.1 78,132.00 18,000.00 TOTAL DISALLOWANCE: 18,000.00 ITA NO.2017/AHD/2013 7 THUS IF AT ALL, YOU ARE NOT INCLINED TO AGREE TO OU R CONTENTION, WE REQUEST YOUR GOOD SELF TO KINDLY RESTRICT THE DISALLOWANCE UNDER RULE 8D(2)(III) TO RS. 78,0007- ONLY, AS HARDLY 10% OF GENERAL EXPENSE OF RS.1,78,132/-OR SA Y RS. 78,0007- MIGHT BE EXPENDED FOR THE PURPOSE OF INVESTMENT, THE SAME IN TURN MAY BE SAID TO BE EXPENDED IN EARNING DIVIDEND INCOME. WE WOULD FURTHER LIKE TO SUBMIT AS UNDER: IN THE APPEAL OF THE ASSESSEE'S CASE FOR THE A.Y. 2 009-10 VIDE ORDER IN APPEAL NO. CIT(A) XIV/ACIT(OSD) CIR. 8/141/2011-12 DATED 15/05 /2012. THE LD. CIT(A) XIV HAD HELD IN PARA 2.3 AS UNDER: '/ HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE SUBMISSION GIVEN BY THE APPELLANT. THE APPELLANT HAS CLAIMED T HAT THE DISALLOWANCE OF 5,02,722.00 MADE BY THE A.O. SHOULD BE RESTRICTE D TO GENERAL EXPENSE OF RS.2,42,344.00 SHOWN IN THE P & L A/C. IT HAS BEEN CLAIMED BY THE APPELLANT THAT FOR CONSIDERING THE D ISALLOWANCE U/S 14 A, THE EXPENSES WHICH ARE GENERALLY IN NATURE SHOULD O NLY BE CONSIDERED AND THE EXPENSES OF SPECIFIC NATURE SUCH AS TENDER FEES, VEHICLE INSURANCE, PROFESSIONAL TAX, STT CHARGES, HOUSE LOA N INTEREST, FINANCE CHARGES, DEPRECIATION ON CAR AND OFFICE REL ATED TO TANKER BUSINESS SHOULD NOT BE CONSIDERED. THE ISSUE IS SIM ILAR TO THE ONE WHICH WAS RAISED BY THE APPELLANT FOR A. Y. 2008-09 . WHILE DECIDING THE APPEAL FOR THAT YEAR, THE CLAIM OF THE APPELLANT WA S ACCEPTED. FOLLOWING MY DECISIONS FOR A. Y. 2008-09, THE CLAIM OF THE AP PELLANT IS ACCEPTED FOR THIS YEAR ALSO. THE A. 0. IS DIRECTED TO RESTRI CT THE DISALLOWANCE TO RS. 2,42,344.00 WHICH ARE GENERAL IN NATURE. THE GROUND OF APPEAL IS PARTLY ALLOWED.' WE REQUEST YOUR GOOD SELF, TO KINDLY CONSIDER THE D ISALLOWANCE U/S 14A, IN LIGHT OF THE ABOVE FACTS, SUBMISSIONS AND EXPLANATIONS. 3. ON PERUSAL OF THE STATEMENT OF INCOME SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS SEEN THAT THE ASSESSE E HAS SHOWN LONG TERM CAPITAL GAIN OF RS.1,71,733/- FROM THE SALE OF SHAR ES OF SYNAPSES SYS. P.LTD. FURTHER, THE ASSESSEE HAS SHOWN LONG TERM CAPITAL G AIN OF RS.78,21,689/- ON SALE OF SHARES OF ADANI ENTERPRISES AND THE SAME IS CLAIMED AS EXEMPT INCOME. ON PERUSAL OF BALANCE SHEET OF THE ASSESSE E, IT IS SEEN THAT AGAINST THE TOTAL FUNDS OF RS.41,29,04,902/- AS ON 31.3.2010, B ORROWED FUNDS ARE REFLECTED AT RS.29,49,86,202/-. FURTHER, AGAINST THE CAPITAL OF RS.11,87,80,533/- INVESTMENTS ARE REFLECTED AT RS.27,66,50,661/- AS O N 31.3.2010. THUS, FUNDS ARE BEING BORROWED FOR MAKING INVESTMENTS. USE OF BORROWED FUNDS FOR ITA NO.2017/AHD/2013 8 MAKING INVESTMENTS INDICATED THAT THE ACTIVITY OF M AKING INVESTMENTS IN THE SHARES IS MORE IN THE NATURE OF BUSINESS ACTIVITY R ATHER THAN INVESTMENT ACTIVITY. ON PERUSAL OF THE BALANCE SHEET, IT IS ALSO SEEN THAT THE SHARES ARE REFLECTED AS INVESTMENTS AS WELL AS STOCK-IN-TRADE. THE ASSESSEE SUBMITTED HIS REPLY AS BELOW: '5. THE ASSESSEE IS CONSISTENTLY FOLLOWING THE ACCO UNTING POLICY OF KEEPING THE SHARES AS INVESTMENT IN HIS BOOKS OF ACCOUNT. HE HA S SHOWN THE SHARES AS INVESTMENT SINCE LAST MANY YEARS. HIS ACCOUNTS ARE REGULARLY AUDITED, HIS RETURNS ARE REGULARLY FILED AND HIS RETURNS ARE REG ULARLY SCRUTINIZED BY THE INCOME TAX DEPARTMENT. TILL A. Y. 2009-10 WHATEVER TRANSACTIONS IN SHARES HAVE TAKEN PLACE WERE REFLECTED AS EITHER CAPITAL G AIN OR CAPITAL LOSS. THIS PRACTICE IS ALSO VERIFIED IN HIS PREVIOUS INCOME TA X ASSESSMENTS AND WAS CONSISTENTLY APPROVED BY INCOME TAX DEPARTMENT. DURING THE YEAR THE ASSESSEE HAS STARTED MAINTAININ G TWO SEPARATE PORTFOLIO OF SHARE INVESTMENT. ALL THE OLD SHARES WHICH ARE REFL ECTED IN THE BOOKS ARE KEPT UNDER INVESTMENT PORTFOLIO. HOWEVER, ALL THE SHARES WHICH WERE PURCHASED DURING THE YEAR AND SOLD DURING THE SAME YEAR WERE REFLECTED AS SHARES HELD FOR TRADING. THE DETAILS OF SUCH SHARES WERE ALREAD Y SUBMITTED ON 30/10/2012 ALONG WITH . EXPLANATION OF AIR TRANSACTIONS AS PER ANNEXURE NO.6. ANY GAIN / LOSS ON TRANSACTION OF THESE SHARES IS SHOWN AS BUS INESS INCOME IN THE RETURN OF THE ASSESSEE.' 4. FINALLY INCOME OF RS.1,51,53,540/- WAS ASSESSED BY THE AO. AGAINST THE SAID ORDER, THE ASSESSEE PREFERRED FIRST STATUT ORY APPEAL BEFORE THE LD.CIT(A) WHO PARTLY ALLOWED THE APPEAL OF THE LD.C IT(A). 5. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER AND HEARD THE LD.DR. APPELLANT HAS CLAIMED THAT THE DI SALLOWANCE OF RS.11,01,769/-MADE BY THE AO SHOULD BE RESTRICTED T O THE GENERAL EXPENSES OF RS.1,78,132/- SHOWN IN THE P&L ACCOUNT. IT HAS BEE N CLAIMED BY THE APPELLANT THAT FOR CONSIDERING THE DISALLOWANCE U/S .14A, THE EXPENSES WHICH ARE GENERAL IN NATURE SHOULD ONLY BE CONSIDERED AND THE EXPENSES OF SPECIFIC NATURE SUCH AS TENDER FEE, VEHICLE INSURANCE, PROFE SSIONAL TAX, STT CHARGES, HOUSE LOAN INTEREST, FINANCE CHARGES, DEPRECIATION ON CAR AND OFFICE ITA NO.2017/AHD/2013 9 EQUIPMENTS RELATED TO TANKER BUSINESS SHOULD NOT BE CONSIDERED. THE ISSUE IS SIMILAR TO THE ONE WHICH WAS RAISED BY THE APPELLAN T FOR A.YS.2008-09 AND 2009-10. WHILE DECIDING THE APPEAL FOR THAT YEAR, CLAIM OF THE APPELLANT WAS ACCEPTED. SINCE IN EARLIER YEARS CLAIM WAS ACCEPT ED BY THE DEPARTMENT, SO, IN OUR CONSIDERED OPINION, THE LD.CIT(A) JUDICIALLY AN D CORRECTLY DIRECTED THE AO TO RESTRICT THE DISALLOWANCE TO RS.1,78,132/-. 6. SO FAR AS SHARES OF ADANI ENTERPRISES ARE CONCER NED, THE LD.CIT(A) HELD AS UNDER: 3.3: DECISION: I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND T HE SUBMISSIONS GIVEN BY THE APPELLANT. AO HAS EMPHASIZED THAT THE APPELLANT HAS BORROWED FUNDS FOR INVESTMENT INTO SHARES, HENCE, I T HAS BECOME AN ADVENTURE INTO A NATURE IN TRADE. CONSEQUENTLY, LTC G DISCLOSED IN RETURN OF INCOME HAVE BEEN ASSESSED AS BUSINESS INC OME. THE EVIDENCES FILED HAVE BEEN CAREFULLY EXAMINED. I COU LD NOT FIND SPECIFIC FINDINGS OR FUND FLOW ANALYSIS SHOWING THAT BORROWE D FUNDS HAVE GONE INTO INVESTMENT IN ACQUISITION OF SHARES OF ADANI E NTERPRISE LTD. AND SYNAPSE SYSTEM PVT. LTD. (SSPL). ON THE OTHER HAND, THE APPELLANT CONTENDS THAT THIS IS A NEW ISSUE EMERGING IN THE Y EAR UNDER CONSIDERATION ALTHOUGH HE HAS BEEN INVESTOR INTO SH ARES FOR LONG TIME. THE APPELLANT HAS SUBMITTED VARIOUS DOCUMENTS INDIC ATING THE WORKING OF LONG TERM CAPITAL GAINS (ADANI ENTERPRIS E SHARES) AS UNDER: SI. NO. SCRIP NO. OF SHARES SALE VALUE DATE OF SALE PURCHASE VALUE PURCHASE DATE LTCG 1 ADANI ENTERPRISE 2000 1075,813 19/05/09 427,940 27/02/07 647,873 2 ADANI ENTERPRISE 3000 2212,353 14/07/09 641,910 27/02/07 1570,443 3 ADANI ENTERPRISE 1098 921,654 20/07/09 234,939 27/02/07 686,715 4 ADANI ENTERPRISE 1902 1596,527 20/07/09 400,542 28/02/07 1195,985 5 ADANI ENTERPRISE 1500 1258,628 21/07/09 315,585 28/02/07 942,743 6 ADANI ENTERPRISE 500 423,972 23/07/09 105,295 28/02/07 318,677 7 ADANI ENTERPRISE 1900 1565,513 31/07/09 400,121 28/02/07 1165,392 ITA NO.2017/AHD/2013 10 8 ADANI ENTERPRISE 2100 1736,100 31/07/09 442,239 28/02/07 1293,861 14000 10790,560 2968,871 7821,689 THE YEAR-WISE DETAILS HAVE BEEN PERUSED AND IT IS N OTICED THAT THE APPELLANT HAS SOLD 14000 SHARES OF ADANI ENTERPRISE , OUT OF TOTAL 36726 SHARES WHICH SHOULD HAVE RESULTED INTO CLOSIN G STOCK OF 22726 SHARES. HOWEVER, IT IS NOTICED THAT THE CLOSING STO CK OF ADANI ENTERPRISE IS AT 45452 SHARES WHICH INCLUDES 22726 BONUS SHARES, THE ALLOTMENT OF BONUS SHARES GIVES INDICATION THAT THE APPELLANT IS A GENUINE INVESTOR. THE ANOTHER PROFIT ON SALE OF SHARES IS RELATING TO SYNAPSE SYSTEM PVT. LTD. WHICH IS CLAIMED AS HAS BEEN HELD BY THE APPELLANT FOR MORE THAN 6 YEARS. THE AO HAS ALSO NOT ALLOWED LTCG ON THIS AND HELD IT TO BE BUSINESS INCOME. THE PERUSAL OF DETAI LS ON RECORD INDICATES THE LTCG SHOWN BY APPELLANT ARE ARRIVED A S UNDER: CLOSING BALANCE OF SSPL AS ON 31/03/2005 = RS.13,19 ,000/- SALE OF SSPL SHARES ON 25/05/2009 =RS. 19,80,000/ - PROFIT - =RS. 6,61,000/- MY ATTENTION IS DRAWN TO THE RATIO LAID DOWN BY ITA T, MUMBAI IN THE CASE OF JANAK S. RANGWALLA VS. ACIT [11 SOT 627 (MU MBAI)] IN WHICH IT IS HELD THAT- ; 'IN THE FACTS OF THE PRESENT CASE, THE ASSESSES IS HOLDING THE SHARES AS INVESTMENT FROM YEAR TO YEAR. IT IS THE INTENTION O F THE ASSESSEE WHICH IS TO BE SEEN TO DETERMINE THE NATURE OF TRANSACTION COND UCTED BY THE ASSESSEE. THOUGH THE INVESTMENT IN SHARES IS ON A LARGE MAGNI TUDE BUT THE SAME SHALL NOT DECIDE THE NATURE OF TRANSACTION. SIMILAR TRANS ACTIONS OF SALE AND PURCHASE OF SHARES IN THE PRECEDING YEARS HAVE BEEN HELD TO BE THE INCOME FROM CAPITAL GAINS BOTH ON LONG TERM AD SHORT TERM BASIS. THE TRANSACTION IN THE YEAR UNDER CONSIDERATION ON ACCOUNT OF SALE AND PURCHASE OF SHARES IS SAME AS IN THE PRECEDING YEARS AND THE SAME MERITS TO BE ACCEPTED AS SHORT TERM CAPITAL GAINS. THERE IS NO' BASIS FOR TREATING THE ASSESSEE AS A TRADER IN SHARES, WHEN HIS INTENTION WAS TO HOLD THE SHARES IN INDIAN COMPANIES AS AN INVESTMENT AND NOT AS STOCK-IN-TRAD E. THE MERE MAGNITUDE OF THE TRANSACTION DOES NOT CHANGE THE NA TURE OF TRANSACTION, WHICH ARE BEING ASSESSED AS INCOME FROM CAPITAL GAI NS IN THE PAST SEVERAL YEARS. THE AO IS DIRECTED TO SET OFF THE LONG TERM CAPITAL LOSS AGAI NST THE SHORT TERM CAPITAL GAIN OF THE YEAR UNDER CONSIDERATION. THE G ROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED.' ITA NO.2017/AHD/2013 11 THE HONOURABLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. COPAL PUROHIT REPORTED IN 228 CTR 582 (BOM) HAS CATEGORIC ALLY HELD THAT THE DELIVERY BASED TRANSACTIONS HAVE TO BE TREATED AS I NVESTMENT TRANSACTIONS AND THE PROFIT RECEIVED THERE FROM IS TO BE TREATED AS SHORT-TERM OR LONG-TERM CAPITAL GAINS DEPENDING UPO N THE PERIOD OF HOLDING. THE COURT ALSO HELD THAT THE TRIBUNAL HAS CORRECTLY HELD THAT THOUGH THE PRINCIPLE OF RES JUDICATA IS NOT ATTRACT ED SINCE EACH ASSESSMENT YEAR IS DIFFERENT IN ITSELF; THERE HAS T O BE UNIFORMITY IN TREATMENT AND CONSISTENCY WHEN THE FACTS AND CIRCUM STANCES ARE SAME/IDENTICAL. THE SLP FILED AGAINST THE JUDGMENT IN THE CASE OF CIT VS. GOPAL PUROHIT (SUPRA) HAS SINCE BEEN REJECTED B Y APEX COURT, THEREFORE, THE JUDGMENT HAS BECOME FINAL. IN VIEW O F RATIO LAID DOWN BY VARIOUS JUDICIAL ORDERS MENTIONED ABOVE, I AM INCLI NED TO AGREE WITH THE APPELLANT. THE AO IS DIRECTED TO TAX AN AMOUNT OF RS.78,21,689/- AND RS.6,61,000/- AS LTCG AS DISCLOSED IN RETURN OF INCOME. THE AO IS ALSO DIRECTED TO ALLOW THE SET OFF OF PRE VIOUS YEAR'S SHORT TERM CAPITAL LOSS OF RS. 3,950/- AS CLAIMED BY THE APPELLANT AS PER LAW. THE GROUNDS OF APPEAL ARE ACCORDINGLY ALLOWED. 7. IN THE CASE OF CIT VS. GOPAL PUROHIT REPORTED IN 228 CTR 582 (BOM) IT IS CATEGORICALLY HELD THAT THE DELIVERY BASED TRANS ACTIONS HAVE TO BE TREATED AS INVESTMENT TRANSACTIONS AND THE PROFIT RECEIVED THE RE FROM IS TO BE TREATED AS SHORT TERM OR LONG TERM CAPITAL GAINS DEPENDING UPO N THE PERIOD OF HOLDING. THE COURT ALSO HELD THAT THE TRIBUNAL HAS CORRECTLY HELD THAT THOUGH THE PRINCIPLE OF RES JUDICATA IS NOT ATTRACTED SINCE EACH ASSESSMENT YEAR IS DIFFERENT IN ITSELF, THERE HAS TO BE UNIFORMITY IN TREATMENT AND CONSISTENCY WHEN THE FACTS AND CIRCUMSTANCES ARE SAME AND IDENT ICAL. THE LD.CIT(A) RIGHTLY DIRECTED THE AO TO TAX AN AMOUNT OF RS.78,2 1,689/- AND RS.6,61,000/- AS LONG TERM CAPITAL GAIN AS DISCLOSED IN THE RETUR N OF INCOME, AND HE ALSO RIGHTLY DIRECTED THE AO TO ALLOW THE SET OFF OF SHO RT TERM CAPITAL LOSS OF RS.3,950/- AS CLAIMED BY THE APPELLANT. IN OUR CON SIDERED OPINION, THERE IS NO INFIRMITY IN THE ORDER OF THE LD.CIT(A) AND THE LD. CIT(A) HAS PASSED DETAILED ITA NO.2017/AHD/2013 12 AND JUDICIOUS ORDERS. IN VIEW OF THE ABOVE OBSERVA TIONS, FINDINGS OF THE LD.CIT(A) DOES NOT REQUIRE ANY INTERFERENCE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 16 TH NOVEMBER, 2017 AT AHMEDABAD. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER ( MAHAVIR PRASAD ) JUDICIAL MEMBER AHMEDABAD; DATED 16 /11/2017