2013 (12) TMI 647 - AT - Income Tax

Appellate tribunal rules for assessee on dividend income & STT rebate in assessment.

The appellate tribunal ruled in favor of the assessee on both issues. The disallowance under section 14A for dividend income from shares held as ... Disallowance u/s 14A – Dividend earned on shares held as stock-in-trade - Held that:- Following M/s. CCI Ltd., vs. JCIT [2012 (4) TMI 282 - KARNATAKA HIGH COURT] - The provisions of section 14A are not applicable to the dividend earned out of the shares held as stock-in-trade - The assessee is not engaged in investment of shares and he is undisputedly into purchase and sale of the shares held as stock in trade - The dividend earned in undisputedly out of the unsold shares – Decided in favour of assessee. Rebate u/s 88E from the tax computed u/s 115JB – Held that:- Following CIT & Another vs. M/s. Horizon Capital Ltd. [2011 (10) TMI 489 - KARNATAKA HIGH COURT] - While computing the total income u/s 115JB of the Act, the assessee is entitled to claim deduction of the amount equal to the STT paid by him in respect of the taxable securities transactions entered into in the course of business during the previous year – Decided in favour of assessee. Issues:1. Disallowance u/s 14A for dividend income from shares held as stock-in-trade.2. Applicability of provisions of section 115JB vis-`a-vis rebate u/s 88E of the Act.Issue 1: Disallowance u/s 14A for dividend income from shares held as stock-in-trade:The appeal concerns the disallowance u/s 14A amounting to Rs. 21,54,498/- for the assessment year 2008-09. The first issue revolves around whether the dividend income of Rs. 1,80,613/- from shares held as stock-in-trade should be subject to disallowance u/s 14A. The appellant contended that all dividend-yielding shares were held as stock-in-trade, not as investments, supported by relevant financial schedules. The appellant relied on the judgment of the Hon'ble Karnataka High Court in the case of M/s. CCI Ltd. vs. JCIT, stating that no expenditure should be deducted from dividend income earned without incurring any expenditure. The tribunal concurred, emphasizing that the appellant was engaged in the purchase and sale of shares as stock-in-trade, making the provisions of section 14A inapplicable to the dividend income from unsold shares. Consequently, the grounds raised by the assessee on this issue were allowed.Issue 2: Applicability of provisions of section 115JB vis-`a-vis rebate u/s 88E of the Act:The second issue pertains to invoking section 115JB of the Act and the allowance of rebate u/s 88E. The Assessing Officer contended that the rebate under section 88E was not allowable while computing the assessment under section 115JB. However, the appellant argued that the tax paid u/s 88E should be credited, citing the judgment of the Hon'ble Karnataka High Court in the case of CIT & Another vs. M/s. Horizon Capital Ltd. The tribunal noted that the issue was resolved in favor of the assessee in the case of M/s. Naman Securities Finance Pvt. Ltd., where it was established that the assessee could claim a deduction equal to the STT paid on taxable securities transactions while computing income under section 115JB. Consequently, the tribunal upheld the order of the Ld CIT (A) and allowed the grounds raised by the assessee on this issue. The appellant's appeal was allowed based on the settled position that the assessee is entitled to claim deduction of STT paid in respect of share trading transactions while computing income under section 115JB.In conclusion, the appellate tribunal ruled in favor of the assessee on both issues, allowing the appeal and providing detailed justifications for the decisions made on the disallowance u/s 14A and the applicability of provisions of section 115JB vis-`a-vis rebate u/s 88E of the Act.