The Supreme Court’s observations in Dunlop cannot be interpreted to mean that the Tribunal is denuded of the powers to grant stay until case for financial stringency is successfully made out by the applicant. There is no conflict in holding this view as also adhering to the settled principles governing grant of stay which lay down that financial constraints of the applicant are important, even if not sole of qualifying, consideration in entertaining a stay application, besides considerations like existence of strong prima facie case, balance of convenience and possibilities of Revenue’s rights of recovery being prejudiced by waiting till the outcome of appeals

The argument that transfer of development rights does not amount to transfer of land or building and therefore s. 50C is not applicable is not acceptable because u/s 2(47)(v) the giving of possession in part performance of a contract as per s. 53A of the Transfer of property Act is deemed to be a “transfer”. When the assessee received the sale consideration and handed over possession of the property vide the development agreement, the condition prescribed in s. 53A of the Transfer of Property Act was satisfied and u/s 2 (47) (v) the transaction of transfer was completed. The fact that the assessee’s name stands in the municipal records does not change the nature of the transaction

one limb of the Government cannot be allowed to defeat the operation of the other limb. While s. 10B requires the foreign exchange to be brought to India within the prescribed period, the RBI permits the assessee to retain the said foreign exchange abroad for specific purposes. RBI is the competent authority for s. 10B as well. The result is that the reinvestment of export earning is deemed to have been received in India and thereafter to have been repatriated abroad (principle in J.B. Boda & Co 223 ITR 271 followed)

The AO had not correctly calculated the number of transactions because sometimes a single transaction is split by the computers trading of the stock exchanges into many smaller transactions but that does not mean that assessee has carried so many transactions. If someone places an order for purchase of 1000 shares and the same is executed by the electronic trading system of stock exchange into 100 smaller transactions, it does not mean that 100 transactions have been entered into. The assessee had carried out only 31 purchase and 25 sale transactions which cannot be said to be a great volume of transactions

Primarily, the intention with which an assessee starts his activity is the most important factor. If shares are purchased from own funds, with a view to keep the funds in equity shares to earn considerable return on account of enhancement in the value of share over a period then merely because the assessee liquidates its investment within six months or eight months would not lead to the conclusion that the assessee had no intention to keep the funds as invested in equity shares but was actually intended to trade in shares. Mere intention to liquidate the investment at higher value does not imply that the intention was only to trade in security. However, it cannot be held that in all circumstances if assessee has used its own funds for share activity then it would only lead to inference of investment being the sole intention. In such circumstances, frequency of transactions will have to be considered to arrive at proper conclusion regarding the true intention of the assessee. However, if the assessee, on the other hand, borrows funds for making investment in shares then definitely it is a very important indicator of its intention to trade in shares

There are differences in the approach of the Tribunal on whether the tribunal can be directly approached for stay of demand without approaching the lower authorities. In view of the decision in Broswel Pharmaceutical Inc vs ITO 83 TTJ 126 (All) it is not mandatory on the part of the assessee to move application before the Revenue Authorities for granting of stay of outstanding demand. Accordingly, there is no merit in the argument of the department that the stay application should be rejected outright since the assessee has not moved any petition before the Revenue Authorities seeking stay of the demand since seeking stay before the lower authorities is directory and not mandatory

The assessee has urged that no expenditure has been identified to have been incurred to exempt income. Neither the AO nor the CIT (A) has rebutted this submission. The AO has made an adhoc estimate which is not sustainable in the light of Hero Cycles. Accordingly, in view of Vegetable Products 88 ITR 192 where it was held that if two constructions are possible, one favouring the assessee should be adopted, the precedent laid down in Hero Cycles should be followed

In view of Godrej Boyce Mfg Co 328 ITR 81 (Bom) Rule 8D is applicable only prospectively i.e. from AY 2008-09 and not for earlier years. The facts showed that the assessee had made the investment in shares out of its own funds and the borrowed funds were entirely utilized for the purpose of its business. The investment in shares in the current year was made from a separate bank account where the surplus funds generated in that year were deposited. The argument that the assessee could have utilized its surplus funds in repaying the borrowings instead of investing in shares and by not doing so, there was diversion of borrowed funds towards investment in shares to earn dividend income is not acceptable in view of CIT vs. Hero Cycles Ltd 323 ITR 518 where it was held, distinguishing Abhishek Industries 286 ITR 1 (P&H), that if investment in shares is made by an assessee out of own funds and not out of borrowed funds, disallowance u/s 14A is not sustainable. Accordingly, the disallowance of interest on borrowed funds was deleted

While volume of transactions is an important indicator of the intention of the assessee whether to deal in shares as trading asset or to hold the shares as investor, it is certainly not the sole criterion. The AO’s conclusion that since sale and purchase had been determined by the volatility in the market, the same is against the basic feature of investor is not based on sound rational reasoning. A prudent investor always keeps a watch on the market trends and, therefore, is not barred under law from liquidating his investments in shares. The law itself has recognized this fact by taxing these transactions under the head “Short Term Capital Gains”. If the AO’s reasoning is accepted, then it would be against the legislative intent itself

The claim of the assessee that it is entitled to tax credit u/ss 90 & 91 in respect of the foreign taxes as well as a deduction u/s 37(1) is not justified and results in a double unintended benefit. On facts, while the assessee paid US Federal Income-tax @ 35% of Rs 35 crores and claimed deduction u/s 37(1) which resulted in tax advantage of Rs 13 crores being 38.5% of this amount, it also claimed tax credit of Rs 35 crores against its Indian income-tax liability despite the fact that the profits were not taxed in India owing to deduction u/s 80HHE. The result is that for a payment of US taxes of Rs 35.01 crores, the assessee claimed tax relief of Rs 48.49 crores in India. Even if tax credit was denied in cases where s. 80HHE was eligible (as done by the CIT (A)), the assessee would still get an effective advantage of 38.5% if it was granted a deduction u/s 37(1). This results in incongruity