2009 (2) TMI 8 - HC - Income Tax

High Court affirms Tribunal's order on Income Tax Act exemptions for dividend income vs. stock-in-trade shares

The High Court upheld the Tribunal's order in a case where the Revenue challenged it. The court clarified the application of exemptions under the Income ... Tribunal has expressed an apprehension that disallowance u/s 14A which the AO is required to ascertain will be quantified keeping in mind only the dividend income arising from shares held as investment and not in respect of the dividend on shares which are part of stock-in-trade – held that apprehension is misconceived as dividend both on shares which form part of investment as well as those which are part of stock-in-trade is exempt u/s 10(33) - no question of law arise – appeals dismissed Issues:Challenging a common order of the Tribunal dated 31.08.2006 in ITA Nos. 540 and 541/Del/2004 pertaining to assessment years 2000-01 and 2001-02.Analysis:The High Court heard the Revenue's challenge to the Tribunal's order. The court found no infirmity in the Tribunal's judgment. The Revenue's counsel acknowledged that the judgment protects the Revenue's interest but raised concerns regarding the disallowance under Section 14A of the Income Tax Act, specifically about quantifying it based on dividend income from shares held as investment versus shares as part of stock-in-trade. The court clarified that the exemption under Section 10(33) of the Act applies to the net amount earned by way of dividend, whether from investment shares or stock-in-trade shares. The court was confident that the Assessing Officer would consider this while following the Tribunal's directions. The assessee's counsel also highlighted this aspect, referring to the Tribunal's observations. The court concluded that no substantial question of law arose, leading to the dismissal of the appeals.