Coming to the revenue’s objection that the assessee borrowed the funds from Indiabulls Financial Services Ltd., in our view, this cannot constitute a factor as in none of the case laws or CBDT circular it has been held that borrowings will not be allowed in investment transactions. In our view the investment in capital assets also can be carried out by way of borrowed funds. There being no bar notified by the law, judicial pronouncement or CBDT Circular, we are unable to accept this view.
INCOME TAX APPELLATE TRIBUNAL, DELHI
ITA No. 1648/Del/2010 Asstt. Yr: 2006-07
ITA No. 2762/Del/2010 -Asstt. Yr: 2006-07
Narendra Gehlaut Vs. JCIT
O R D E R
PER R.P. TOLANI, J.M :
These are two cross appeals, one by the assessee and the other by Revenue against CIT(A)’s order dated 4-2-2009, relating to A.Y. 2006-07. Respective grounds are as under:
Assessee’s appeal (ITA no. 1648/Del/10):
“1. The learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in upholding the action of learned Assessing Officer in assessing short term capital gains in respect of transactions in shares amounting to Rs. 7,61,56,446/- as income from business and applying the maximum marginal rate applicable to the assessee for the relevant assessment year instead of confessional rate of tax of 10% in terms of section 111A of the Income Tax Act, 1961.
2. The learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in upholding the action of learned Assessing Officer in assessing short term capital loss in respect of transactions in commodities amounting to Rs. 2,95,16,035/- as loss from business allegedly on the ground that on the basis of nature, volume scale and frequency of transaction same is of business nature.”
Revenue’s appeal (ITA no. 2762/Del/10):
“On the facts and in the circumstances of the case the ld. CIT(A) ha erred in law and on facts in directing the AO to verify whether the interest paid amounting to Rs. 1,42,37,378/- is compensatory or penal in nature which is not in accordance with the provisions of Section 25(1) of the Act; the ld. CIT(A) should have given a categorical finding on this issue.”
2. Brief facts are: The assessee derives business income from hiring of earthmoving equipments. In addition to hiring income, from purchase and sale of shares, mutual funds, derivatives, futures. Regular books of accounts are maintained. During the course of assessment AO observed that assessee carries on shares and like activities by way of two types:
(i) by way of actual delivery transaction; and
(ii) by way of non-delivery.
2.1. For the assessment year in question the assessee filed its return, disclosing following types of income:
