Puran Associates Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 3785/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1239 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 09-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY TRIPATHI
• Keywords: Capital asset; Business income; Business expenditure; Rule of consistency; Earning of tax free income; Wrong claim; Sham transactions; Rule 8D; Set aside; Capital Gains
• Section: 143(3); 14A; 143(2); 208; 72; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANTMEMBER ITA NO.3785/DEL./2017 ASSESSMENT YEAR:2013-14 M/S. PURAN ASSOCIATES PVT. LTD., 4 TH FLOOR, PUNJABI BHAWAN, 10, ROUSE AVENUE, NEW DELHI VS. ACIT, CIRCLE-20(1), NEW DELHI PAN : AAACP0458J (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI CHANDAN AGGARWAL, CA SHRI AKHIL MAHAJAN, CA DEPARTMENT BY SHRI SANJAY TRIPATHI, SR.DR DATE OF HEARING 05.03.2020 DATE OF PRONOUNCEMENT 29.05.2020 ORDER PER O.P. KANT,A.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORD ER DATED 30/03/2017 PASSED BY THE LEARNED CIT(APPEALS)-7, NE W DELHI [IN SHORT THE LD. CIT(A)] FOR ASSESSMENT YEAR 2013-14 RAISING FOLLOWING GROUNDS: 1. THAT BOTH THE LD. CIT(A) AND LD. AO ERRED SIMILA RLY IN LAW AND IN FACTS THAT INCOME FROM CAPITAL GAINS AS DECLARED BY THE ASSESSEE WAS TAKEN AS INCOME FROM BUSINESS AS FOLLOWS: 2 ITA NO. 3785/DEL./2017 A. THAT THE LONG-TERM CAPITAL GAINS ON SALE OF FIXE D MATURITY PLANS OF RS.2,07,40,000/- WHERE THE ASSESSEE OFFERED TO T AX AT 20%, BOTH THE CIT(A) AND AO FAILED TO UNDERSTAND THAT TH E FIXED MATURITY PLANS ARE NOT TRADING STOCK AND HENCE CANN OT BE TAXED AT 30%. B. THAT BOTH CIT(A) AND AO FAILED TO TAKE INTO ACCO UNT THE CIRCULARS NO. 6 OF 2015 DATED 9 APRIL 2015 ON CAPITAL GAINS I N RESPECT OF MUTUAL FUND UNDER THE FIXED MATURITY PLANS; C. THAT THE LONG CAPITAL LOSS OF RS.55,64.762 SHOUL D ALSO BEEN TREATED AS CAPITAL LOSS ENTITLED OFFSET WITH THE LO NG-TERM INCOME AND THAT IT CANNOT BE TREATED AS INCOME FROM BUSINE SS. 2. THAT BOTH CIT(A) AND AO HAS ERRED IN NOTIONALLY DISALLOWING EXPENSES U/S 14A READ WITH RULE 8D OF RS.53,16,568 WITHOUT APPRECIATING THAT THERE IS NO FURTHER GROUND TO DIS ALLOW ANY FURTHER SUM OTHER THAN RS.10,82,334 ALREADY DISALLOWED BY T HE ASSESSEE. A. THAT THE LD. CIT(A) AND AO FAILED TO ESTABLISH WHY THE RULE 8D SHOULD BE INVOKED ESPECIALLY WHEN THE ASSESSEE HIMS ELF HAS DISALLOWED RS.10,82,334 AND WHICH WERE THE EXPENSES THAT CONNECTION WITH TAX FREE EARNINGS. 3. THAT BOTH THE CIT(A) AND AO ERRED IN DISALLOWING IN AD-HOC AND ARBITRARY MANNER BUSINESS EXPENSES OF RS.15,48,318 INCURRED FOR GENUINE BUSINESS ACTIVITIES. 4. THE ASSESSEE PRAYS TO ADD, ALTER OR MODIFY ANY G ROUNDS OF APPEAL WHICH IS NECESSARY IN THE INTEREST OF JUSTICE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS ENGAGED IN THE BUSINESS OF SALE AND PURC HASE OF THE SHARES IN MUTUAL FUNDS. FOR THE YEAR UNDER CONSIDER ATION, THE ASSESSEE FILED RETURN OF INCOME ON 29/09/2013, DECL ARING TOTAL INCOME OF 13,15,55,690/-. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND N OTICE UNDER SECTION 143(2) OF THE INCOME-TAX ACT, 1961 (IN SHOR T THE ACT) WAS ISSUED AND COMPLIED WITH. IN THE SCRUTINY ASSESSMEN T COMPLETED UNDER SECTION 143(3) OF THE ACT ON 14/01/2016, THE ASSESSING OFFICER MADE CERTAIN ADDITIONS/DISALLOWANCES AND AS SESSED THE 3 ITA NO. 3785/DEL./2017 TOTAL INCOME AT 15,35,95,820/-. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A), WHO DISMISSED THE APP EAL OF THE ASSESSEE. AGGRIEVED WITH THE FINDING OF THE LD. CIT (A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING T HE GROUNDS AS REPRODUCED ABOVE. 3. THE GROUND NO.1 OF THE APPEAL RELATES TO TREATIN G CAPITAL GAIN OF 1,51,75,238/- AS BUSINESS INCOME. 3.1 THE FACTS QUA THE ISSUE IN DISPUTE ARE THAT THE ASSESSEE CLAIMED LONG-TERM CAPITAL GAIN OF 1,51,75,238/- HAVING DETAILS AS UNDER: S.NO. PARTICULARS AMOUNT (RS.) I. LONG TERM CAPITAL GAIN EXEMPT U/S 10(38) I.T. ACT, 1961 (-)55,64,762 II. LONG TERM CAPITAL GAIN SHOWN WITH INDEXATION IN THE RETURN BUT TAKEN AS BUSINESS INCOME WITHOUT THE BENEFIT OF INDEXATION WHICH IS NOT ALLOWABLE WHILE COMPUTING INCOME UNDER THE HEAD BUSINESS INCOME: COST AS SHOWN: RS.20,00,00,000/- SALE VALUE: RS.22,07,40,000/- 2,07,40,000 TOTAL 1,51,75,238 3.2 ACCORDING TO THE ASSESSING OFFICER IN LAST SEVE RAL YEARS, THE INCOME TAX DEPARTMENT HAS BEEN CONSISTENTLY HOLDING THE ASSESSEES INVESTMENT IN SHARES AND SECURITIES TO B E STOCK IN TRADE (EXCEPT FOR SHARES OF THE DABUR INDIA LTD.) A ND ACCORDINGLY TREATING THE GAINS FROM SALE OF THE SHARES AS BUSIN ESS INCOME. THE ASSESSING OFFICER NOTED THAT INCOME TAX APPELLATE T RIBUNAL (IN SHORT THE TRIBUNAL) IN ASSESSMENT YEAR 2005-06 TO 2007-08 HAS UPHELD THE STAND OF THE DEPARTMENT. THE LEARNED AO, THEREFORE, 4 ITA NO. 3785/DEL./2017 HELD THE NET CAPITAL GAIN SHOWN BY ASSESSEE OF 1,51,75,238/-AS BUSINESS INCOME. 3.3 BEFORE THE LD. CIT(A), THE ASSESSEE FILED WRITT EN SUBMISSIONS. THE LD. CIT(A) ALSO FOLLOWING THE FINDING OF THE TR IBUNAL IN ITA NO.1118, 942 AND 943/DEL/2010 DATED 31/01/2012 UPHE LD THE FINDING OF THE ASSESSING OFFICER. THE RELEVANT FIND ING OF THE LD. CIT(A) IS REPRODUCED AS UNDER: 4.2 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER AND WRITTEN SUBMISSIONS FILED BY THE LD. AR. THE AO FOLLOWING T HE DEPARTMENTAL STAND IN THE PAST SEVERAL YEARS TREATED THE CAPITAL GAINS DISCLOSED BY THE APPELLANT AS BUSINESS INCOME. THE AO HAS ALS O STATED THAT THE DEPARTMENTAL STAND IS AFFIRMED BY THE HONBLE I TAT IN THEIR DECISIONS IN ITA NO. 1118/942 & 943 DATED 31.01.201 2. IN THE SAID ORDER, THE FINDINGS OF THE LD. CIT(APPEALS) HAVE BE EN REVERSED AND THE ORDER OF THE AO STANDS RESTORED. THE HONBLE IT AT IN THE ORDER HAS HELD AS UNDER: 8. WE ARE OF THE OPINION THAT THE CHARACTER OF A TRANSACTION CANNOT BE DETERMINED SOLELY ON THE APPL ICATION OF ANY ABSTRACT TEST OR RULE AND THE CUMULATIVE FACTOR S AFFECTING THE TRANSACTIONS HAVE TO BE SEEN. HABITUAL DEALING IN A PARTICULAR ITEM AND THAT TOO SINCE INCEPTION IS IND ICATIVE OF THE ASSESSEES INTENTION OF TRADING. MERELY FOR TAKING BENEFIT OF PROVISIONS OF SEC. 111A OF THE ACT APPLICABLE FROM THE AY 2005- 06, THE ASSESSEE CANNOT BE CATEGORIZED AS AN INVEST OR, ESPECIALLY WHEN THE AFORESAID FACTS SPEAK OTHERWISE AND THE LD. AR DID NOT PLACE ANY MATERIAL, OTHER THAN RESOLUTIO N DATED 22.04.2005, BEFORE US WHILE THE AUDITOR REPORTS AND FACTS FOR THE YEARS UNDER CONSIDERATION REFLECTING INTENTION OF THE ASSESSING, LEAD US TO THE CONCLUSION THAT THE ASSES SEE IS CONTINUING ITS ACTIVITIES AS IN EARLIER YEARS OF A TRADER IN SHARES. AS OBSERVED IN SUTLEJ COTTON MILLS SUPPLY AGENCY LT D. (SUPRA), IT IS A MATTER OF FIRST IMPRESSION WITH THE COURT WHET HER A PARTICULAR TRANSACTION IS IN THE NATURE OF TRADE OR NOT., IT IS NOT EVEN THE ASSESSEES CASE THAT THEY HAD HELD ALL THE SHARES FOR A LONG DURATION. THE FACTS AND CIRCUMSTANCES OF THE C ASE BEFORE US, WHEN VIEWED IN THE LIGHT OF PRINCIPLES LAID DOW N IN THE VARIOUS DECISIONS REFERRED TO ABOVE, LEAD US TO THE CONCLUSION THAT THE VOLUMINOUS SHARE TRANSACTIONS WERE IN THE ORDINARY LINE OF THE ASSESSEES BUSINESS; PURCHASE OF SHARE BY THEM WAS NOT FOR THE PURPOSE OF EARNING DIVIDEND, BUT WITH T HE DOMINANT INTENTION OF RESALE IN ORDER TO EARN PROFITS; THE P ROFIT MADE BUY THEM IS NOT OF MERE ENHANCEMENT OF VALUE OF THE SHA RES, BUT IS A 5 ITA NO. 3785/DEL./2017 PROFIT MADE IN THE CARRYING ON OF A BUSINESS SCHEME OF PROFIT MAKING; HUGE VOLUME OF SHARE TRANSACTIONS, THE REPE TITION AND CONTINUITY OF THE TRANSACTIONS, GIVE THEM A FLAVOR OF TRADE , THE MAGNITUDE, FREQUENCY AND THE RATIO OF SALES TO PURC HASES ON THE TOTAL HOLDINGS IS EVIDENCE THAT THE ASSESSEE HAD NO T PURCHASED THE SHARES AS AN INVESTMENT, BUT WITH THE INTENTION TO TRADE IN SUCH SCRIPS. IN THE LIGHT OF VIEW TAKEN IN THE AFOR ESAID DECISIONS, INCLUDING IN WALLFORT FINANCIAL SERVICES LTD. (SUPRA) RELIED UPON BY THE LD. DR, WE ARE OF THE OPINION TH AT THE LD. CIT(A) WAS NOT JUSTIFIED IN ACCEPTING THE CLAIM OF THE ASSESSEE AS INVESTOR IN SHARES, ESPECIALLY WHEN THE NATURE O F TRANSACTIONS IN THE YEARS UNDER CONSIDERATION WAS S IMILAR TO WHAT THE ASSESSEE HAD UNDERTAKEN HITHER TO AND TURN OVER OF THE ASSESSEE CONTINUALLY INCREASED IN THE YEARS UND ER 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. 3.4 BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE FILED A PAPER BOOK, CONTAINING PAGES 1 TO 125, AND SUBMITTED THAT THE TRIBUNAL IN SUBSEQUENT YEARS HAS HELD THE ACTIVITY OF PURCHA SE AND SALE OF THE SHARES AS INVESTMENT ACTIVITY AND CONSEQUENT PR OFIT HAS BEEN HELD TO BE CAPITAL GAIN. HE SUBMITTED THAT IN VIEW OF THE CONSISTENT FINDING OF THE TRIBUNAL, THE ACTIVITY MI GHT BE TREATED AS INVESTMENT ACTIVITY. 3.5 THE LEARNED DR, ON THE OTHER HAND, RELIED ON TH E ORDER OF THE LOWER AUTHORITIES. 3.6 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES O N THE ISSUE IN DISPUTE. THE ISSUE IN DISPUTE OF TREATING LONG-T ERM CAPITAL GAIN SHOWN BY THE ASSESSEE AS BUSINESS INCOME HAS BEEN R AISED IN THE CASE OF THE ASSESSEE FOR LAST SO MANY YEARS. THE TR IBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2005-06 TO 2007-08 (ITA NO.1118, 942 AND 943/DEL./2010 ORDER DATED 31/ 03/2012) HELD THE ACTIVITY OF PURCHASE AND SALE OF THE SHARE S AS BUSINESS INCOME. THE RELEVANT FINDING OF THE TRIBUNAL IS REP RODUCED AS UNDER: 6 ITA NO. 3785/DEL./2017 8. WE ARE OF THE OPINION THAT THE CHARACTER OF A TRANSACTION CANNOT BE DETERMINED SOLELY ON THE APPLICATION OF ANY ABST RACT TEST OR RULE AND THE CUMULATIVE FACTORS AFFECTING THE TRANSACTIO NS HAVE TO BE SEEN. HABITUAL DEALING IN A PARTICULAR ITEM AND THA T TOO SINCE INCEPTION IS INDICATIVE OF THE ASSESSEE'S INTENTION OF TRADING. MERELY FOR TAKING BENEFIT OF PROVISIONS OF SEC. 111 A OF THE ACT APPLICABLE FROM THE AY 2005-06, THE ASSESSEE CANNOT BE CATEGOR IZED AS AN INVESTOR, ESPECIALLY WHEN THE AFORESAID FACTS SPEAK OTHERWISE AND THE LD. AR DID NOT PLACE ANY MATERIAL, OTHER THAN R ESOLUTION DATED 22.4.2005, BEFORE US WHILE THE AUDITOR REPORTS AND FACTS FOR THE YEARS UNDER CONSIDERATION ,REFLECTING INTENTION OF THE ASSESSEE, LEAD US TO THE CONCLUSION THAT THE ASSESSEE IS CONTINUIN G ITS ACTIVITIES AS IN EARLIER YEARS OF A TRADER IN SHARES. .AS OBSERVE D IN SUTLEJ COTTON MILLS SUPPLY AGENCY LTD. (SUPRA), IT IS A MATTER OF FIRST IMPRESSION WITH THE COURT WHETHER A PARTICULAR TRANSACTION IS IN THE NATURE OF TRADE OR NOT. , IT IS NOT EVEN THE ASSESSEE'S CASE THAT THEY HAD HELD ALL THE SHARES FOR A LONG DURATION. THE FACTS AND C IRCUMSTANCES OF THE CASE BEFORE US, WHEN VIEWED IN THE LIGHT OF PRINCIP LES LAID DOWN IN THE VARIOUS DECISIONS REFERRED TO ABOVE, LEAD US TO THE CONCLUSION THAT THE VOLUMINOUS SHARE TRANSACTIONS WERE IN THE ORDINARY LINE OF 24 ITA NOS.1118,942&943/DEL./2010 THE ASSESSEE'S BU SINESS; PURCHASE OF SHARES BY THEM WAS NOT FOR THE PURPOSE OF EARNING DIVIDEND, BUT WITH THE DOMINANT INTENTION OF RESALE IN ORDER TO EARN PROFITS; THE PROFIT MADE BY THEM IS NOT OF MERE ENH ANCEMENT 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 TRANS ACTIONS, 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 LD. DR, WE ARE OF THE OPINION THAT THE LD. 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 T HE FINDINGS OF THE LD. CIT(A) AND RESTORE THE ORDER OF THE AO. THE REFORE, GROUND NO.1 IN THESE APPEALS IS ALLOWED. 3.7 SUBSEQUENTLY, THE TRIBUNAL IN ASSESSMENT YEAR 2 008-09, 2009-10 AND 2011-12 (ITA NO.3078/2011, 820/2013 AND 5054/2015 IN ORDER DATED 20/08/2018) ANALYSIS OF VA RIOUS DECISIONS AND THE CIRCULARS ISSUED BY THE CENTRAL B OARD OF THE 7 ITA NO. 3785/DEL./2017 DIRECT TAXES (CBDT) HELD THE ACTIVITY OF PURCHASE O N SALE OF THE SHARES AS ASSESSABLE UNDER LONG-TERM CAPITAL GAIN A ND NOT BUSINESS INCOME. THE DETAILED FINDING OF THE TRIBUN AL IS REPRODUCED AS UNDER: 14. WE HAVE HEARD THE RIVAL SUBMISSION AND ALSO PE RUSED THE RELEVANT FINDINGS GIVEN IN THE IMPUGNED ORDERS AS W ELL AS MATTER REFERRED TO BEFORE US. THE CORE ISSUE BEFORE US IS, WHETHER THE AMOUNT OF RS.15,41,96,869/- WHICH HAS BEEN CLASSIFI ED AS BUSINESS INCOME BY THE ASSESSING OFFICER WHICH INCOME HAS BE EN OFFERED TO TAX BY THE ASSESSEE UNDER THE HEAD CAPITAL GAIN I S TO BE ASSESSED AS BUSINESS INCOME OR CAPITAL GAIN. THE ASSESSING O FFICER HAS SUMMARIZED THE FOLLOWING INCOME SHOWN UNDER THE HEA D CAPITAL GAIN AS BUSINESS INCOME: LONG TERM CAPITAL GAIN RS. 32,39,427 (EXCEPT DABUR INDIA LTD.) LONG TERM CAPITAL GAIN RS.10,13,29,232 (WITHOUT INDEXATION) LONG TERM CAPITAL GAIN RS. 2,93,99,990 (WITH INDEXATION AFTER REMOVING INDEXATION) SHORT TERM CAPITAL GAIN RS. 1,85,41,338 SHORT TERM CAPITAL GAIN WITH PMS (NET) RS. 16,86,882 TOTAL RS. 15,41,96,869/- THE ASSESSEE COMPANY IS A NBFC, WHICH WAS ALSO IN T HE BUSINESS OF SALE AND PURCHASE OF SHARES AND MUTUAL FUND. IN SO FAR AS TRANSACTIONS IN MUTUAL FUNDS ARE CONCERNED, THE SAM E HAS BEEN OFFERED UNDER THE HEAD PROFITS AND GAINS OF BUSINE SS AND PROFESSION. HOWEVER, VARIOUS SHARES WHICH HAS BEEN HELD UNDER THE INVESTMENT PORTFOLIO ON WHICH ASSESSEE HAS BEEN SHO WN UNDER THE HEAD LONG-TERM CAPITAL GAIN AND SHORT-TERM CAPITAL GAIN AS PER THE DETAILS INCORPORATED ABOVE. THE INCOME EARNED B Y 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 EQUITIESLTCG11,48,78,740 13,51,06,960 8 ITA NO. 3785/DEL./2017 (85%) STCG2,02,28,220 (15%) INCOME FROM OTHER SOURCES (C) DIVIDEND EARNED FROM INVESTMENT IN EQUITIES 8,19,14,172 15. ONE OF THE MAIN CONTENTIONS OF THE REVENUE WHIC H HAS BEEN STRONGLY HARPED BY THE TRIBUNAL IN THE EARLIER YEAR S IS THAT, ASSESSEE PRIOR TO 31ST MARCH, 2004 WAS HOLDING SHARES AS ST OCK IN TRADE, HENCE INTENTION WAS TO DO BUSINESS ONLY AND MERE CL ASSIFICATION IN BOOKS AS INVESTMENT BY MAKING ENTRIES IS NOT DECISI VE FACTOR. IT WAS ON 01.04.2004 THE SHARES WERE CONVERTED INTO INVEST MENT PORTFOLIO AND SINCE A.Y. 2005-06; ASSESSEE HAS SEGREGATED THE INCOME UNDER THE HEAD CAPITAL GAINS AND BUSINESS INCOME. APA RT FROM THAT, ASSESSING OFFICER HAS NOTED THAT MAGNITUDE OF THE T RANSACTION AND THE VOLUME SHOWS THAT ASSESSEE WAS INTO SALE AND PU RCHASE OF SHARE FOR THE INTENTION OF BUSINESS ONLY AND HAS AL SO REFERRED TO THE HUGE TURNOVER AND ALSO HIGHLIGHTED VARIOUS FACTS IT HAS BEEN DISCUSSED AND INCORPORATED IN DETAIL IN THE EARLIER PART OF THE ORDER. NOW FROM THE PERUSAL OF THE SCHEDULE OF INVESTMENTS ESPECIALLY INVESTMENT MADE IN THE SHARES UNDER THE HEAD LONG- TERM CAPITAL GAIN, WE FIND THAT THE MAJOR AMOUNT ON AMOUNT OF L ONG-TERM CAPITAL GAIN IS ARISING ON ACCOUNT OF SALE OF SHARE S OF PUNJAB TRACTORS LTD. WHICH IS AT RS.10,13,29,232/-, OUT OF TOTAL LONG-TERM CAPITAL GAIN OF RS. 15,41,96,869/-, WHICH HAS BEEN TREATED AS BUSINESS INCOME BY THE ASSESSING OFFICER. SHARES OF PUNJAB TRACTORS WERE ACQUIRED IN THE YEARS 2005 AND 2006 AND SINCE THE DATE OF PURCHASE IT WAS SHOWN UNDER THE HEAD INVESTMENT, BECAUSE THESE SHARES WERE ACQUIRED BY THE ASSESSEE FOR HAVING CON TROLLING STAKE/INTEREST IN THE SAID COMPANY. LATER ON, THESE SHARES WERE SOLD TO MAHINDRA & MAHINDRA AS A PART OF TAKEOVER D EAL WHICH IS EVIDENT FROM SALE PURCHASE AGREEMENT DATED 08.05.20 07. THEREAFTER MAHINDRA & MAHINDRA HAS GIVEN A LETTER OF OFFER FOR PURCHASE OF EQUITY SHARES FROM PUBLIC AT LARGE AFTER THE ACQUIS ITION OF THE SHARES OF PUNJAB TRACTORS FROM THE ASSESSEE IN ACCORDANCE WITH SEBI RULES. IN SO FAR AS LONG-TERM CAPITAL GAIN SHOWN ON THE SA LE OF THE PUNJAB TRACTORS LTD., IT CANNOT BE DISPUTED THAT IT WAS NE VER A PART OF STOCK- IN-TRADE, PRIOR TO 1.4.2004, BECAUSE, FIRSTLY, THEY WERE ACQUIRED MUCH LATER TO THIS DATE; AND SECONDLY, IT WAS ACQUIRED F OR THE PURPOSE OF ACQUIRING CONTROLLING STAKE/INTEREST. HENCE SUCH AN ACQUISITION CANNOT BE HELD TO BE FOR TRADING PURPOSE. THE TRANS FER OF SUCH SHARES ON A TAKEOVER OF PUNJAB TRACTORS LTD. BY MAHINDRA & MAHINDRA ALSO GOES TO PROVE THAT THIS WAS AN INVESTMENT HELD BY T HE ASSESSEE. SIMILARLY, IN THE CASE OF ABN AMRO BANK THEY WERE A LWAYS 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 ARISIN G FROM SAKE OF THESE TWO SHARES HAS TO BE ASSESSED AS CAPITAL GAI N. 9 ITA NO. 3785/DEL./2017 16. FURTHER, FROM THE PERUSAL OF DETAILS SHOWN UNDE R LTCG OF OTHER SCRIPS ALSO, WE FIND THAT THE SAME HAVE BEEN ACQUIR ED IN THE YEARS 2005, 2006 AND 2007 AND WERE TREATED AS PART OF INV ESTMENT AND THE HOLDING DAYS OF THESE SHARES ARE RANGING FROM 3 72 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 I NVESTMENT IN THE BOOKS AND LATER ON SOLD AFTER MORE THAN A YEAR ON W HICH 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 TH E TRADING PURPOSE AND OTHER FOR THE INVESTMENT PURPOSE AND THERE IS N O PROVISION THAT SHARES HELD IN INVESTMENT PORTFOLIO HAVE TO BE TREA TED AS PART OF STOCK. THE MOST PARAMOUNT FACTOR WHICH NEEDS TO BE EXAMINED IN SUCH CASES IS, WHETHER THE INTENTION OF THE ASSESSE E WHILE ACQUIRING SHARES WAS FOR INVESTMENT PURPOSE OR FOR TRADING IN FUTURE FOR PROFIT. HOWEVER, WE FIND THAT IN THE EARLIER YEARS THE TRIB UNAL HAS TAKEN A DIFFERENT VIEW AND HELD THAT EVEN IF THE SHARES HAV E BEEN HELD UNDER INVESTMENT PORTFOLIO ALSO, IT CAN BE TAXED AS BUSIN ESS INCOME. ONE OF THE CORE REASONING FOR ARRIVING TO THIS CONCLUSION WAS THAT THE ASSESSEE HAS BEEN TRADING IN SHARES AND THE AUDIT R EPORT ALSO SUGGEST THAT THE ASSESSEE IS DEALER IN SHARES AND P RIOR TO 31ST MARCH, 2004 ASSESSEE WAS A FULL-FLEDGED TRADER OF S HARE. THUS, THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE B ECAME THE DECISIVE FACTOR TO HOLD THAT IT WAS ONLY FOR THE BUSINESS PU RPOSE. THE CONCLUSION OF THE TRIBUNAL IN THIS REGARD READS AS UNDER: 8. WE ARE OF THE OPINION THAT THE CHARACTER OF A TR ANSACTION CANNOT BE DETERMINED SOLELY ON THE APPLICATION OF A NY ABSTRACT TEST OR RULE AND THE CUMULATIVE FACTORS AFFECTING T HE TRANSACTIONS HAVE TO BE SEEN. HABITUAL DEALING IN A PARTICULAR I TEM AND THAT TOO SINCE INCEPTION IS INDICATIVE OF THE ASSESSEES INTENTION OF TRADING. MERELY FOR TAKING BENEFIT OF PROVISIONS OF SEC. 111A OF THE ACT APPLICABLE FROM THE AY 2005-06, THE ASSESSE E CANNOT BE CATEGORIZED AS AN INVESTOR, ESPECIALLY WHEN THE AFO RESAID FACTS SPEAK OTHERWISE AND THE ID. AR DID NOT PLACE ANY MA TERIAL, OTHER THAN RESOLUTION DATED 22.4.2005, BEFORE US WH ILE THE AUDITOR REPORTS AND FACTS FOR THE YEARS UNDER CONSI DERATION REFLECTING INTENTION OF THE ASSESSEE, LEAD US TO TH E CONCLUSION THAT THE ASSESSEE IS CONTINUING ITS ACTIVITIES AS I N EARLIER YEARS OF A TRADER IN SHARES. AS OBSERVED IN SUTLEJ COTTON MILLS SUPPLY AGENCY LTD (SUPRA), IT IS A MATTER OF FIRST IMPRES SION WITH THE COURT WHETHER A PARTICULAR TRANSACTION IS IN THE NA TURE OF TRADE OR NOT., IT IS NOT EVEN THE ASSESSEES CASE THAT TH EY HAD HELD ALL THE SHARES FOR A LONG DURATION. THE FACTS AND CIRCU MSTANCES OF THE CASE BEFORE US, WHEN VIEWED IN THE LIGHT OF PRI NCIPLES LAID DOWN IN THE VARIOUS DECISIONS REFERRED TO ABOVE, LE AD US TO THE CONCLUSION THAT THE VOLUMINOUS SHARE TRANSACTIONS W ERE IN THE ORDINARY LINE OF THE ASSESSEES BUSINESS; PURCHASE OF SHARES BY THEM WAS NOT FOR THE PURPOSE OF EARNING DIVIDEND, B UT WITH THE 10 ITA NO. 3785/DEL./2017 DOMINANT INTENTION OF RESALE IN ORDER TO EARN PROFI TS; 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 TRANS ACTIONS, 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 TH E 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 FINANCIA L SERVICES LTD.(SUPRA) RELIED UPON BY THE ID. DR, WE ARE OF TH E OPINION THAT THE ID. CIT(A) WAS NOT JUSTIFIED IN ACCEPTING THE C LAIM OF THE ASSESSEE AS INVESTOR IN SHARES ESPECIALLY WHEN THE NATURE OF TRANSACTIONS IN THE YEARS UNDER CONSIDERATION WAS S IMILAR TO WHAT THE ASSESSEE HAD UNDERTAKEN HITHER TO AND TURN OVER OF THE ASSESSEE CONTINUALLY INCREASED IN THE YEARS UND ER 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 PRINCIPLE OF THE TRIBUNA L IS TO BE FOLLOWED AS IT IS, THEN AS OBSERVED IN THE EARLIER PART OF T HE ORDER, IN SO FAR AS THE TRANSACTION OF SHARES OF PUNJAB TRACTORS LTD. A ND ABN AMRO ARE CONCERNED, RIGHT FROM DAY ONE IT WAS ACQUIRED AS A PART OF INVESTMENT ONLY AND WAS CLASSIFIED AS SUCH IN BOOKS RIGHT FROM THE DAY OF ACQUISITION AND IT IS NOT THE CASE THAT THES E SHARES WERE EARLIER PART OF STOCK-IN-TRADE WHICH HAS BEEN CONVE RTED INTO INVESTMENT AFTER 01.04.2004. WE HAVE ALREADY HELD T HAT THE SHARES OF PUNJAB TRACTORS LTD. WERE ACQUIRED FOR CONTROLLI NG INTEREST AND ABN AMRO SHARES ARE NOT TRADEABLE IN STOCK MARKET A ND IF ONE GOES BY THE INTENTION PART, THEN THESE TWO SCRIPS COULD NEVER BE HELD TO BE INTENDED FOR TRADING PURPOSES. THUS, THE AFORESAID DECISION WILL NOT BE BINDING AT LEAST FOR THESE TWO SCRIPS. FOR THE O THER SCRIPS ALSO, IF WE SEE THE VOLUME OF TRANSACTION AND THE PERIOD OF HOLDING, THEN WE FIND THAT THE TRANSACTION IN THE SHARES WHICH WAS H ELD FOR MORE THAN A YEAR CONSTITUTE 98.38%. FOR THE SAKE OF READY REF ERENCE, THE PERIOD OF HOLDING, VOLUME OF SHARES DEALT, PERCENTAGE OF S HARES HELD IN LTCG AND OTHER PERCENTAGE OF GAIN IN SHARES ARE INC ORPORATED HEREUNDER:- PERIOD OF HOLDING MORE THAN 365 DAYS 81 TO 364 DAYS 91 TO 180 DAYS 60 TO 90 DAYS 30 TO 59 DAYS LESS THAN 30 DAYS QUANTITY OF SHARES 1,33,65,009 53,003 1,01,571 43,971 78,813 67,802 PERCENTAGE TO TOTAL QUALITY 97.48% 03.8% 0.74% 0.32% 0.57% 0.49% GAIN OR LOSS 1,19,85,50,369 86,05,051 20,57,841 21,45,605 22,70,962 19,21,580 PERCENTAGE OF CAPITAL GAIN TO 98.34% 0.70% 0.16% 017% 0.18% 0.15% 11 ITA NO. 3785/DEL./2017 TOTAL CAPITAL GAIN *INCLUSIVE OF SHARES OF DABUR INDIA LTD., PUNJAB TR ACTORS LTD. AND ABN AMRO SECURITIES PVT. LTD. TOTAL CAPITAL RS. LONG TERM CAPITAL GAIN CLAIMED EXEMPT 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 AMR O 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 SHARE S 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 TAX ED UNDER THE HEAD LONG TERM CAPITAL GAIN. THIS HAS BEEN CLARIF IED 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 SHAR ES AND SECURITIES CAPITAL GAINS OR BUSINESS INCOME INS TRUCTIONS 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 PROPERT Y OF ANY KIND HELD BY AN ASSESSEE, WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFESSION, BUT DOES NOT INCLUDE ANY ST OCK-IN-TRADE OR PERSONAL ASSETS SUBJECT TO CERTAIN EXCEPTIONS. A S REGARDS SHARES AND OTHER SECURITIES, THE SAME CAN BE HELD E ITHER AS CAPITAL ASSETS OR STOCK-IN-TRADE/ TRADING ASSETS OR BOTH. DETERMINATION OF THE CHARACTER OF A PARTICULAR INVE STMENT IN SHARES OR OTHER SECURITIES, WHETHER THE SAME IS IN THE NATURE OF A CAPITAL ASSET OR STOCK-IN- TRADE, IS ESSENTIALLY A FACT-SPECIFIC DETERMINATION AND HAS LED TO A LOT OF UNCERTAINTY A ND LITIGATION IN THE PAST. 2. OVER THE YEARS, THE COURTS HAVE LAID DOWN DIFFER ENT PARAMETERS TO DISTINGUISH THE SHARES HELD AS INVEST MENTS FROM THE SHARES HELD AS STOCK- IN-TRADE. THE CENTRAL BOA RD OF DIRECT TAXES ('CBDT') HAS ALSO, THROUGH INSTRUCTION NO. 18 27, DATED AUGUST 31, 1989 AND CIRCULAR NO. 4 OF 2007 DATED JU NE 15, 2007, SUMMARIZED THE SAID PRINCIPLES FOR GUIDANCE O F THE FIELD FORMATIONS. 3. DISPUTES, HOWEVER, CONTINUE TO EXIST ON THE APPL ICATION OF THESE PRINCIPLES TO THE FACTS OF AN INDIVIDUAL CASE SINCE THE TAXPAYERS FIND IT DIFFICULT TO PROVE THE INTENTION IN ACQUIRING SUCH SHARES/SECURITIES. IN THIS BACKGROUND, WHILE RECOGN IZING THAT NO UNIVERSAL PRINCIPAL IN ABSOLUTE TERMS CAN BE LAID D OWN TO DECIDE THE CHARACTER OF INCOME FROM SALE OF SHARES AND SEC URITIES (I.E. WHETHER THE SAME IS IN THE NATURE OF CAPITAL GAIN O R BUSINESS 12 ITA NO. 3785/DEL./2017 INCOME), CBDT REALIZING THAT MAJOR PART OF SHARES/S ECURITIES TRANSACTIONS TAKES PLACE IN RESPECT OF THE LISTED O NES AND WITH A VIEW TO REDUCE LITIGATION AND UNCERTAINTY IN THE MA TTER, IN PARTIAL MODIFICATION TO THE AFORESAID CIRCULARS, FURTHER IN STRUCTS THAT THE ASSESSING OFFICERS IN HOLDING WHETHER THE SURPLUS G ENERATED FROM SALE OF LISTED SHARES OR OTHER SECURITIES WOUL D BE TREATED AS CAPITAL GAIN OR BUSINESS INCOME, SHALL TAKE INTO ACCOUNT THE FOLLOWING- A) WHERE THE ASSESSEE ITSELF, IRRESPECTIVE OF THE P ERIOD OF HOLDING THE LISTED SHARES AND SECURITIES, OPTS TO T REAT THEM AS STOCK-IN-TRADE, THE INCOME ARISING FROM TRANSFER OF SUCH SHARES/SECURITIES WOULD BE TREATED AS ITS BUSINESS INCOME, B) IN RESPECT OF LISTED SHARES AND SECURITIES HELD FOR A PERIOD OF MORE THAN 12 MONTHS IMMEDIATELY PRECEDING THE DATE OF IT S TRANSFER, IF THE ASSESSEE DESIRES TO TREAT THE INCOME ARISING FROM THE TRANSFER THEREOF AS CAPITAL GAIN, THE SAME SHALL NO T BE PUT TO DISPUTE BY THE ASSESSING OFFICER. HOWEVER, THIS STA ND, ONCE TAKEN BY THE ASSESSEE IN A PARTICULAR ASSESSMENT YE AR, SHALL REMAIN APPLICABLE IN SUBSEQUENT ASSESSMENT YEARS AL SO AND THE TAXPAYERS SHALL NOT BE ALLOWED TO ADOPT A DIFFE RENT/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 KEEPING IN VIEW THE AFORESAID CIRCULARS ISSUED BY T HE CBDT. 4. IT IS, HOWEVER, CLARIFIED THAT THE ABOVE SHALL N OT APPLY IN RESPECT OF SUCH TRANSACTIONS IN SHARES/SECURITIES W HERE THE GENUINENESS OF THE TRANSACTION ITSELF IS QUESTIONAB LE, 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 LITI GATION AND MAINTAINING CONSISTENCY IN APPROACH ON THE ISSUE OF TREATMENT OF INCOME DERIVED FROM TRANSFER OF SHARES AND SECUR ITIES. ALL THE RELEVANT PROVISIONS OF THE ACT SHALL CONTINUE TO AP PLY ON THE TRANSACTIONS INVOLVING TRANSFER OF SHARES AND SECUR ITIES. 17.1 LATER ON CBDT AGAIN CLARIFIED IN THE FOLLOWING MANNER:- F. NO. 225/12/2016/ITA.II GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE (CBDT) NORTH BLOCK, NEW DELHI, DATED THE 2ND OF MAY, 2016 13 ITA NO. 3785/DEL./2017 TO PRINCIPAL CHIEF-COMMISSIONERS OF INCOME-TAX/ PRINCIPAL DIRECTORS GENERAL OF INCOME-TAX SUBJECT: - CONSISTENCY IN TAXABILITY OF INCOME/LOSS ARISING FROM TRANSFER OF UNLISTED SHARES UNDER INCOME-TAX ACT, 1 961-REGD REGARDING CHARACTERIZATION OF INCOME FROM TRANSACTI ONS IN LISTED SHARES AND SECURITIES, CENTRAL BOARD OF DIRE CT TAXES (CBDT) HAD ISSUED A CLARIFICATORY CIRCULAR NO. 6/2 016 DATED 29TH FEBRUARY, 2016, WHEREIN WITH A VIEW TO REDUCE LITIGATION AND MAINTAIN CONSISTENCY IN APPROACH IN ASSESSMENTS , IT WAS INSTRUCTED THAT INCOME ARISING FROM TRANSFER OF LIS TED SHARES AND SECURITIES, WHICH ARE HELD FOR MORE THAN TWELVE MON THS WOULD BE TAXED UNDER THE HEAD 'CAPITAL GAIN' UNLESS THE T AX-PAYER ITSELF TREATS THESE AS ITS STOCK- IN-TRADE AND TRAN SFER THEREOF AS ITS BUSINESS INCOME. IT WAS FURTHER STATED THAT IN OTHER SITUATIONS, THE ISSUE WAS TO BE DECIDED ON THE BASI S OF EXISTING CIRCULARS ISSUED BY THE CBDT ON THIS SUBJECT. 2. SIMILARLY, FOR DETERMINING THE TAX-TREATMENT OF INCOME ARISING FROM TRANSFER OF UNLISTED SHARES FOR WHICH NO FORMA L MARKET EXISTS FOR TRADING, A NEED HAS BEEN FELT TO HAVE A CONSISTENT VIEW IN ASSESSMENTS PERTAINING TO SUCH INCOME. IT H AS, ACCORDINGLY, BEEN DECIDED THAT THE INCOME ARISING F ROM TRANSFER OF UNLISTED SHARES WOULD BE CONSIDERED UNDER THE HE AD CAPITAL GAIN', IRRESPECTIVE OF PERIOD OF HOLDING, WITH A VI EW TO AVOID DISPUTES/LITIGATION AND TO MAINTAIN UNIFORM APPROAC H. 3. IT IS, HOWEVER, CLARIFIED THAT THE ABOVE WOULD N OT BE NECESSARILY APPLIED IN THE SITUATIONS WHERE: I. THE GENUINENESS OF TRANSACTIONS IN UNLISTED SHAR ES ITSELF IS QUESTIONABLE; OR II. THE TRANSFER OF UNLISTED SHARES IS RELATED TO A N ISSUE PERTAINING TO LIFTING OF CORPORATE VEIL; OR III. THE TRANSFER OF UNLISTED SHARES IS MADE ALONG WITH THE CONTROL AND MANAGEMENT OF UNDERLYING BUSINESS; AND THE ASSE SSING OFFICER WOULD TAKE APPROPRIATE VIEW IN SUCH SITUATI ONS. 4. THE ABOVE MAY BE BROUGHT TO THE NOTICE OF ALL TH E NECESSARY COMPLIANCE. 17.2 NOW THIS CIRCULAR HAS BEEN APPROVED AND UPHELD IN MANY JUDGMENTS INCLUDING THAT OF HON'BLE GUJARAT HIGH CO URT IN THE CASE OF PCIT VS. RAMNIWAS RAMJIVAN KASAT, REPORTED IN 248 T AXMAN 484. (GUJ). FOLLOWING THE ABOVE TWO CIRCULARS, THE TRIBU NAL IN ASSESSEES OWN CASE IN THE A.Y. 2011-12 HAS DECIDED THE ISSUE IN FAVOUR. APART FROM THAT, THERE ARE MANY JUDGMENTS NOW INCLUDING T HAT OF HONBLE JURISDICTIONAL HIGH COURT RENDERED AFTER THE JUDGME NT OF TRIBUNAL ORDER FOR THE EARLIER YEARS (SUPRA), WHEREIN IT HAS BEEN CONSISTENTLY HELD THAT IF THE SHARES HAVE BEEN HELD UNDER THE PO RTFOLIO OF 14 ITA NO. 3785/DEL./2017 INVESTMENT WHICH IS SEPARATE FROM THE SHARES THEN S AME 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 HONBLE 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., I TA 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 P RECEDENCE AND ACCORDINGLY, WE HOLD THAT IN SO FAR AS TRANSACTION IN SALE OF SHARES SHOWN UNDER THE HEAD LONG TERM CAPITAL GAIN SAME CANNOT BE TAXED UNDER THE HEAD BUSINESS INCOME ESPECIALLY IN THE LIGHT OF THE CATEGORICAL CLARIFICATION BY THE CBDT. 3.8 FURTHER, THE TRIBUNAL IN THE ASSESSEES OWN CAS E FOR ASSESSMENT YEAR 2010-11 (ITA NO. 701/2015 IN ORDER DATED 02/01/2019) FOLLOWING THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2008-09, 2009-10 IN 2011-12 UPHELD THE ACTIVIT Y OF THE PARTIES ON SALE OF THE SHARES ASSESSABLE UNDER THE HEAD CAPITAL GAIN. THE RELEVANT FINDING OF THE TRIBUNAL REPRODUC ED AS UNDER: 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 CAN NOT BE TREATED AS BUSINESS INCOME OR LOSS AND ALSO LONG-TERM GAIN CAN NOT BE TREATED AS BUSINESS INCOME. ACCORDINGLY, GROUND NO. 1 RAISE D BY THE REVENUE STANDS DISMISSED. 3.9 FURTHER, IN ASSESSMENT YEAR 2012-13 I.E. IMMEDI ATELY PRECEDING ASSESSMENT YEAR, THE TRIBUNAL IN ITA NO.4711/DEL/2016 IN ORDER DATED 26/03/2018 HELD THE ACTIVITY OF PURCHASE ON SALE OF THE SHARES ASSESSABLE UNDER THE HEAD 15 ITA NO. 3785/DEL./2017 CAPITAL GAIN. THE RELEVANT FINDING OF THE TRIBUNAL IS REPRODUCED AS UNDER: 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE AS SESSEE IS NON BANKING FINANCIAL COMPANY AND INCOME FROM CAPITAL G AINS WERE INVESTMENT MADE IN EQUITIES ARE SOLD. THE ASSESSEE TREATED LONG TERM CAPITAL GAIN FROM SALE OF EQUITIES HELD FOR MO RE THAN 12 MONTHS EXEMPT U/S 10(38) OF THE ACT. THE ASSESSING OFFICER TREATED IT AS BUSINESS INCOME, NOW, THE ABOVE ISSUE IS SQUARELY C OVERED IN FAVOUR OF THE ASSESSEE BY CIRCULAR NO. 6 DATED 29.02.2016 ISSUED BY CBDT. THE ABOVE CIRCULARS PEAKS THAT IF SHARES ARE HELD F OR MORE THAN 12 MONTHS, IF ASSESSEE SHOWS IT AS LTCG, SAME SHOULD B E ACCEPTED. 7. IN VIEW OF ABOVE FACTS WE ARE OF THE OPINION THA T WHEN THE ASSESSEE HIMSELF HAS TREATED THE INCOME ARISING FRO M SALE OF SECURITIES HELD FOR MORE THAN 12 MONTHS AS CAPITAL GAINS, THERE IS NO REASON TO DISPUTE IT BY ASSESSING OFFICER. 8. IN VIEW OF THIS GROUND NO. 2 OF THE APPEAL OF TH E ASSESSEE IS ALLOWED HOLDING THAT LONG TERM GAIN FROM LISTED SEC URITIES OF RS.25,13,359 IS CHARGEABLE TO TAX UNDER THE HEAD CA PITAL GAIN AND NOT BUSINESS INCOME. GROUND NO. 2 OF THE APPEAL IS ALLOWED. 2.10 IN VIEW OF THE CONSISTENT FINDING OF THE TRIBU NAL SINCE ASSESSMENT YEAR 2008-09, RESPECTFULLY FOLLOWING THE FINDING OF THE TRIBUNAL FOR ASSESSMENT YEAR 2008-09 TO 2012-13, WE SET ASIDE THE ORDER OF THE LOWER AUTHORITIES AND HOLD THE ACT IVITY OF PURCHASE AND SALE OF SHARES IN QUESTION AS INVESTME NT ACTIVITY TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN. 3. THE GROUND NO.2 RELATES TO DISALLOWANCE OF 53,16,568/- UNDER SECTION 14A READ WITH RULE 8D OF INCOME TAX R ULES, 1962. THE ASSESSEE DISCLOSED INCOME OF 28.3 CRORES AND MADE DISALLOWANCE OF 10,82,334/-, UNDER SECTION 14A OF THE ACT AS UNDER: 16 ITA NO. 3785/DEL./2017 3.1 THE ACTION OF THE ASSESSEE OF REDUCING 53,16,568/-CLAIMING TO BE EXPENSES ON ACCOUNT OF THE INCOME ON WHICH NO ACTIVITY WAS DONE IN THE PREVIOUS YEAR, WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND THE EXPLANATION OF THE ASSESSEE THAT NO EXPENSES WERE INCURRED TOWARD EARNING OF DIVIDEND INCOME SHARES O F DABUR INDIA LTD, WHICH WAS A STRATEGIC INVESTMENT, WAS ALSO REJ ECTED. THE ASSESSING OFFICER, ACCORDINGLY MADE THE ADDITION OF 53,16,568/-. 3.2 THE LD. CIT(A) HAS ALSO UPHELD THE ACTION OF TH E ASSESSING OFFICER OBSERVING AS UNDER: 5.3 IT IS EVIDENT FROM THE ABOVE THAT THE APPELLAN T HAS CHOSEN TO REDUCE A SUM OF RS.53,16,568/- BY EXCLUDING THE DIV IDEND RECEIVED FROM M/S. DABUR INDIA LTD. AT RS.26,48,96,800/- CON SULTING 83% OF THE TOTAL DIVIDEND RECEIVED AND CLAIMED AS EXEMPT I NCOME. ACCORDINGLY, 83% OF THE DISALLOWANCE COMPUTED AS PE R RULE 8D(2)(III) I.E. 0.5% OF AVERAGE VALUE OF INVESTMENT IS EXCLUDE D AND A NET DISALLOWANCE OF RS.10,82,334/- IS COMPUTED AS AGAIN ST ACTUAL DISALLOWANCE OF RS.63,98,902/-. THE APPELLANT COMPA NY HAS COMPUTED THE DISALLOWANCE AS PER SECTION 14A READ W ITH RULE 8D(2)(III). HOWEVER, IT IS NOT UNDERSTOOD AS TO HOW THE SAID 17 ITA NO. 3785/DEL./2017 DISALLOWANCE CAN BE RESTRICTED TO RS.10,82,334/- ON THE PLEA THAT AS 83% OF THE EXEMPT INCOME IS RECEIVED AS DIVIDEND FR OM DABUR INDIA LTD., THE DISALLOWANCE UNDER RULE 8D(2)(III) IS TO BE COMPUTED ON A PERCENTAGE BASIS. RULE 8D(2)(III) IS REPRODUCED AS UNDER: (1) WHERE THE ASSESSING OFFICER HAVING REGARD TO T HE ACCOUNTS OF THE ASSESSEE OF THE PREVIOUS YEAR, IS NOT SATISF IED WITH- (A) THE CORRECTNESS OF THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE; OR (B) THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT FOR SUCH PREVIOUS YEAR, HE SHALL DETERMINE THE AMOUNT OF EXPENDITURE IN RELATI ON TO SUCH INCOME IN ACCORDANCE WITH THE PROVISIONS OF SU B-RULE (2). (2) THE EXPENDITURE IN RELATION TO INCOME WHICH DO ES NOT FORM PART OF THE TOTAL INCOME SHALL BE THE AGGREGATE OF FOLLOWING AMOUNTS, NAMELY:- (I).. (II).. (III) AN AMOUNT EQUAL TO ONE-HALF PER CENT OF THE A VERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE-SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. 5.4 THE COMPUTATION MADE BY THE APPELLANT COMPANY I S AS PER RULE 8D(2)(III) WHICH DOES NOT PROVIDE FOR ANY PERC ENTAGE TO BE APPLIED ON THE DIVIDEND INCOME, TO ARRIVE AT THE DI SALLOWANCE. AS THE FACTUM OF EXEMPT INCOME CLAIMED IS NOT DENIED AND C OMPUTATION IS ALSO AS PER THE GOVERNING RULE I.E. RULE 8D(2)(III) , THE DISALLOWANCE HAS TO BE AS PER THE LETTER OF THE RULE. IN VIEW TH EREFORE, THE PLEA OF THE LD. AR THAT SINCE 83% OF THE DIVIDEND INCOME IS FROM DABUR INDIA LTD., THE DISALLOWANCE IS TO BE WORKED OUT ON PERCENTAGE BASIS, IS NOT IN ORDER. THE LD. ARS RELIANCE ON THE DECIS ION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. HOLCIM INDI A (P) LTD. IS MISPLACED AS THE APPELLANT HAS DIVIDEND INCOME OF R S.28.38 CRORES ON THE INVESTMENTS. IT IS NOT THE CASE THAT NO EXEM PT INCOME IS EARNED, AS WAS THE CASE IN THE REFERRED JUDGMENT. I N VIEW THEREOF, THE COMPUTATION OF DISALLOWANCE IS TO BE AS PER RUL E 8D(2)(III) OF THE I.T. RULES WHICH HAS BEEN CORRECTLY WORKED BY THE A O AT RS.63,98,602/- AND AFTER REDUCING THE DISALLOWANCE COMPUTED BY THE APPELLANT COMPANY AT RS.10,82,334/-, ADDITIONAL DISALLOWANCE OF RS.53,16,568/- IS MADE. AS THE COMPUTATION IS, A S PER SECTION 14A OF THE ACT READ WITH RULE 8D(2)(III) OF THE I.T . RULES, NO INTERFERENCE IS CALLED FOR AND THE ACTION OF THE AO IS UPHELD. DISALLOWANCE OF RS.53,16,568/- IS, ACCORDINGLY, CON FIRMED. THIS GROUND OF APPEAL IS RULED AGAINST THE APPELLANT. 18 ITA NO. 3785/DEL./2017 3.3 BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE REFERRED TO PAGE 122 OF THE PAPER BOOK CONTAINING DETAILS OF DI VIDEND INCOME EARNED FROM VARIOUS SHARES/MUTUAL FUNDS ETC. ACCORD ING TO THE DETAILS, DIVIDEND INCOME OF 26,53,52,190/-WAS EARNED FROM SHARES OF DABUR INDIA LTD AND BALANCE DIVIDEND WA S EARNED FROM INVESTMENT IN SHARES AND MUTUAL FUNDS. THE CONTENTI ON OF THE ASSESSEE THAT INVESTMENT IN THE SHARES OF DABUR IN DIA LTD HAS BEEN MADE AS PROMOTER OF THE COMPANY AND NO EXPENDI TURE WAS INCURRED FOR EARNING DIVIDEND INCOME FROM SAID INVE STMENT. 3.4 THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS NOT RECORDED ANY DISSATISFACTION ON THE CLAIM OF THE ASSESSEE OF EXPENSES INCURRED TOWARD EARNING OF EXE MPT INCOME, AND THUS IN ABSENCE OF ANY SUCH DISSATISFACTION REC ORDED BY THE ASSESSING OFFICER, HE IS BARRED FROM MAKING THE DIS ALLOWANCE. 3.5 THE LD DR, ON THE OTHER HAND, RELIED ON THE ORD ER OF THE LOWER AUTHORITIES AND SUBMITTED THAT ONCE THE ASSES SEE ITSELF HAS FOLLOWED THE PROCEDURE LAID DOWN UNDER SECTION 14A READ WITH RULE 8D OF INCOME TAX RULES FOR COMPUTING THE DISAL LOWANCE, THERE WAS NO REQUIREMENT OF RECORDING EXPRESS DISSA TISFACTION IN THE ASSESSMENT ORDER. 3.6 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES O N THE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON REC ORD. 3.7 THE FIRST CONTENTION OF THE ASSESSEE THAT NO EX PENSES WERE BEEN DISALLOWED CORRESPONDING TO THE STRATEGIC INVE STMENT MADE IN THE SHARES OF THE DABUR INDIA LTD AS PROMOTER. I N THIS REGARD, THE HONBLE SUPREME COURT IN THE CASE OF MAXOPP INV ESTMENT LTD VS CIT IN 402 ITR 640 HAS RECENTLY HELD THAT: 34. HAVING CLARIFIED THE AFORESAID POSITION, THE F IRST AND FOREMOST ISSUE THAT FALLS FOR CONSIDERATION IS AS TO WHETHER THE DOMINANT 19 ITA NO. 3785/DEL./2017 PURPOSE TEST, WHICH IS PRESSED INTO SERVICE BY THE ASSESSEES WOULD APPLY WHILE INTERPRETING SECTION 14A OF THE ACT OR WE HAVE TO GO BY THE THEORY OF APPORTIONMENT. WE ARE OF THE OPINION THAT THE DOMINANT PURPOSE FOR WHICH THE INVESTMENT INTO SHARES IS MAD E BY AN ASSESSEE MAY NOT BE RELEVANT. NO DOUBT, THE ASSESSE E LIKE MAXOPP INVESTMENT LIMITED MAY HAVE MADE THE INVESTMENT IN ORDER TO GAIN CONTROL OF THE INVESTEE COMPANY. HOWEVER, THAT DOES NOT APPEAR TO BE A RELEVANT FACTOR IN DETERMINING THE ISSUE AT HA ND. FACT REMAINS THAT SUCH DIVIDEND INCOME IS NON-TAXABLE. IN THIS S CENARIO, IF EXPENDITURE IS INCURRED ON EARNING THE DIVIDEND INC OME, THAT MUCH OF THE EXPENDITURE WHICH IS ATTRIBUTABLE TO THE DIVIDE ND INCOME HAS TO BE DISALLOWED AND CANNOT BE TREATED AS BUSINESS EXP ENDITURE. KEEPING THIS OBJECTIVE BEHIND SECTION14A OF THE ACT IN MIND, THE SAID PROVISION HAS TO BE INTERPRETED, PARTICULARLY, THE WORD IN RELATION TO THE INCOME' THAT DOES NOT FORM PART OF TOTAL INCOME . CONSIDERED IN THIS HUE, THE PRINCIPLE OF APPORTIONMENT OF EXPENSE S COMES INTO PLAY AS THAT IS THE PRINCIPLE WHICH IS ENGRAINED IN SECT ION 14A OF THE ACT. THIS IS SO HELD IN WALFORT SHARE AND STOCK BROKERS P LTD. , RELEVANT PASSAGE WHEREOF IS ALREADY REPRODUCED ABOV E, FOR THE SAKE OF CONTINUITY OF DISCUSSION, WE WOULD LIKE TO QUOTE THE FOLLOWING FEW LINES THEREFROM. THE NEXT PHRASE IS, IN RELATION TO INCOME WHICH D OES NOT FORM PART OF TOTAL INCOME UNDER THE ACT. IT MEANS THAT IF AN INCOME DOES NOT FORM PART OF TOTAL INCOME, THEN THE RELATE D EXPENDITURE IS OUTSIDE THE AMBIT OF THE APPLICABILITY OF SECTIO N 14A .. XXXXXXXXX THE THEORY OF APPORTIONMENT OF EXPENDITURE BETWEEN TAXABLE AND NON-TAXABLE HAS, IN PRINCIPLE, BEEN NOW WIDENED UNDER SECTION 14 A. 35. THE DELHI HIGH COURT, THEREFORE, CORRECTLY OBSE RVED THAT PRIOR TO INTRODUCTION OF SECTION 14A OF THE ACT, THE LAW WAS THAT WHEN AN ASSESSEE HAD A COMPOSITE AND INDIVISIBLE BUSINESS W HICH HAD ELEMENTS OF BOTH TAXABLE AND NON-TAXABLE INCOME, TH E ENTIRE EXPENDITURE IN RESPECT OF SAID BUSINESS WAS DEDUCTI BLE AND, IN SUCH A CASE, THE PRINCIPLE OF APPORTIONMENT OF THE EXPEN DITURE RELATING TO THE NON-TAXABLE INCOME DID NOT APPLY. THE PRINCIPLE OF APPORTIONMENT WAS MADE AVAILABLE ONLY WHERE THE BUSINESS WAS DIVI SIBLE. IT IS TO FIND A CURE TO THE AFORESAID PROBLEM THAT THE LEGIS LATURE HAS NOT ONLY INSERTED SECTION 14A BY THE FINANCE (AMENDMENT) ACT , 2001 BUT ALSO MADE IT RETROSPECTIVE, I.E., 1962 WHEN THE INCOME T AX ACT ITSELF CAME INTO FORCE. THE AFORESAID INTENT WAS EXPRESSED LOUD LY AND CLEARLY IN THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FIN ANCE BILL, 2001. WE, THUS, AGREE WITH THE VIEW TAKEN BY THE DELHI HI GH COURT, AND ARE NOT INCLINED TO ACCEPT THE OPINION OF PUNJAB & HARYANA HIGH COURT WHICH WENT BY DOMINANT PURPOSE THEORY. THE AF ORESAID REASONING WOULD BE APPLICABLE IN CASES WHERE SHARES ARE HELD AS 20 ITA NO. 3785/DEL./2017 INVESTMENT IN THE INVESTEE COMPANY, MAY BE FOR THE PURPOSE OF HAVING CONTROLLING INTEREST THEREIN. ON THAT REASON ING, APPEALS OF MAXOPP INVESTMENT LIMITED AS WELL AS SIMILAR CASES WHERE S HARES WERE PURCHASED BY THE ASSESSEES TO HAVE CONTROLLING INTEREST IN THE INVESTEE COMPANIES HAVE TO FAIL AND ARE, THEREFORE, DISMISSED. 3.8 IN VIEW OF THE ABOVE, THAT THE CONTENTION OF TH E ASSESSEE INVESTMENT MADE FOR ACQUIRING CONTROLLING INTEREST IN DABUR INDIA LTD SHOULD NOT BE SUBJECT TO DISALLOWANCE UNDER SEC TION 14A IS REJECTED. 3.9 REGARDING THE SECOND CONTENTION OF THE ASSESSEE THAT NO DISSATISFACTION WAS RECORDED BY THE ASSESSING OFFIC ER ON THE CLAIM OF THE ASSESSEE OF EXPENSES TOWARD EARNING EXEMPT I NCOME, WE AGREE WITH THE FINDING OF THE LD. CIT(A), THAT WHEN THE ASSESSEE ITSELF AS COMPUTED THE DISALLOWANCE IN TERMS OF RUL E 8D AND THEREAFTER REDUCING THE EXPENSES CORRESPONDING TO E ARNING DIVIDEND INCOME FROM SHARES OF M/S DABUR INDIA LTD. WAS NOT JUSTIFIED. THE ASSESSING OFFICER IN PARA 4.3 TO 4.5 OF THE ASSESSMENT ORDER HAS DULY REJECTED THE ACTION OF TH E ASSESSEE OF REDUCING THE EXPENSES RELATED TO EARNING OF THE DIV IDEND INCOME FROM THE SHARES OF M/S. DABUR INDIA LTD. ACCORDINGL Y, WE REJECT THE CONTENTION OF THE ASSESSEE AND UPHELD THE FINDI NG OF THE LEARNED CIT(A) ON THE ISSUE IN DISPUTE. THE GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE IS ACCORDINGLY DISMISSED. 4. THIRD GROUND IS REGARDING DISALLOWANCE OF 15,48,318/-OUT OF BUSINESS EXPENDITURE. 4.1 THE BRIEF FACTS QUA THE ISSUE IN DISPUTE ARE TH AT THE ASSESSING OFFICER ASKED THE ASSESSEE TO PROVIDE DET AILS OF BUSINESS PROMOTION EXPENSES OF 1,54,83,180/-, BUT THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE BEFORE TH E ASSESSING OFFICER ADMITTED THAT CERTAIN EXPENSES HAD NOT BEEN INCURRED FOR 21 ITA NO. 3785/DEL./2017 THE BUSINESS PURPOSE AND HE WAS UNABLE TO OFFER ANY EXPENDITURE IN RESPECT THEREOF AND THE ASSESSEE OFFERED 10% OF THE TOTAL EXPENDITURE OF 15,48,318/- FOR DISALLOWANCE. 4.2 THE LD. CIT(A) HAS ALSO UPHELD THE DISALLOWANCE OBSERVING AS UNDER: 6.2 THE AO DISALLOWED RS.15,48,318/- @ 10% OF RS.1,54,83,180/- OUT OF THE BUSINESS PROMOTION EXPE NSES AS IT WAS NOTED DURING ASSESSMENT PROCEEDINGS THAT THERE WERE SEVERAL EXPENSES OF EXPENDITURE WHICH APPEARED TO HAVE NOT BEEN INCURRED FOR BUSINESS PURPOSES. THE LD. AR ADMITTED THAT IT WAS NOT POSSIBLE TO FILTER OUT EXPENDITURE WHICH MAY HAVE BEEN INCUR RED FOR NON- BUSINESS PURPOSE AND ACCORDINGLY OFFERED 10% TO THE TOTAL EXPENDITURE CLAIMED UNDER BUSINESS PROMOTION EXPENS ES AS DISALLOWANCE. IT IS CLEAR THEREFORE, THAT THE SAID DISALLOWANCE WAS MADE ON AGREED BASIS AND THE APPELLANT ADMITTED THA T THERE WAS AN ELEMENT OF NON BUSINESS EXPENDITURE CLAIMED UNDER T HIS HEAD. THE APPELLANT IS NOW IN APPEAL AGAINST THE AGREED ADDIT ION. THE LD. AR HAS CONTENDED THAT THE SAID EXPENDITURE IS INCURRED FOR BUSINESS PURPOSES AND ALLOWABLE U/S 37(1). THE LD. AR HAS NO T FURNISHED ANY DETAILS OF THE IMPUGNED EXPENDITURE OR ANY JUST IFICATION FOR THE SAME. THE DISALLOWANCE WAS MADE ON AGREED BASIS. TH IS HAS NOT BEEN CONTROVERTED BY THE LD. AR. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BANTA SINGH KARTAR SINGH VS. CIT, 125 ITR 239 HAD OBSERVED AN ORDER BASED ON AN AGREEMENT C ANNOT GIVE RISE TO GRIEVANCE AND THE SAME CANNOT BE AGITATED I N APPEAL. THE HONBLE KERALA HIGH COURT IN THE DECISION IN THE CA SE OF CIT VS. VAMADEVAN BHANU, 330 ITR 559 HELD THAT ASSESSEE CAN NOT AGAINST AN ASSESSMENT ON AGREED BASIS. 6.3 THE APPELLANT MADE A VERY GENERAL SUBMISSION TH AT THE SAID DISALLOWANCE IS NOT CALLED FOR AS THE EXPENDITURE I S INCURRED FOR BUSINESS PURPOSES. MERE ASSERTION, WITHOUT ADDUCING ANY MATERIAL EVIDENCE AND DOCUMENTATION DOES NOT ESTABLISH THAT THE IMPUGNED EXPENDITURE IS ALLOWABLE AS A BUSINESS EXPENDITURE. IN THE ABSENCE OF ANY DETAILS PERTAINING TO THE IMPUGNED EXPENDITU RE AND ALSO AS IT WAS ON THE AGREED BASIS ON ADMISSION BY THE LD. AR THAT EXPENDITURE NOT WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE WAS NOT RULED OUT IN THE CLAIM UNDER THE HEAD BUSINESS PROMOTION, NO INTERFERENCE IS CALLED FOR. THE DISALLOWANCE OF RS. 15,48,318/- MADE BY THE AO, IS CONFIRMED. THIS GROUND OF APPEAL IS R ULED AGAINST THE APPELLANT. 4.3 BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT D ISALLOWANCE HAS BEEN MADE ON THE AD-HOC BASIS, WITHOUT IDENTIFY ING THE 22 ITA NO. 3785/DEL./2017 EXPENSES TOWARDS NON-BUSINESS PURPOSE AND THUS DISA LLOWANCE NEED TO BE DELETED. 4.4 ON THE CONTRARY, THE LEARNED DR RELIED ON THE O RDER OF THE LOWER AUTHORITIES. 4.5 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES O N THE ISSUE IN DISPUTE. IT IS UNDISPUTED THAT 10 PERCENTILE DIS ALLOWANCE WAS AGREED BY THE AUTHORIZED REPRESENTATIVE OF THE ASSE SSEE BEFORE THE ASSESSING OFFICER AND THEREFORE THE ASSESSING O FFICER DID NOT IDENTIFY THE INDIVIDUAL EXPENDITURE NOT RELATED TO THE BUSINESS PURPOSE. IN VIEW OF THE ADMISSION OF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FOR DISALLOWANCE OF 10% OF THE EXPENSES AS INCURRED FOR NON-BUSINESS PURPOSE, WE D O NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND ACCORDINGLY UPHOLD THE SAME. THE GROUND NO.3 OF THE APPEAL OF THE ASSESSEE IS ACCORDINGLY DISMISSED. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH MAY, 2020. SD/- SD/- (BHAVNESH SAINI) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 29 TH MAY, 2020. RK/- (D.T.D.S) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI