TaxTMI 
TaxTMI 
2009 (2) TMI 737
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....he year the assessee also dealt with trading in paraxylene. On the perusal of the profit and loss account the Assessing Officer noted that the assessee had shown sale of paraxylene to the tune of Rs. 4,899.92 lakhs and other income at Rs.349.05 lakhs. Such other income included dividend of Rs. 319.67 lakhs on the long-term investments and interest on debentures of Rs. 24.92 lakhs. On the debit side, purchase of paraxylene was recorded at Rs.4,897.61 lakhs and administrative and other expenses at Rs. 6.19 lakhs. Thus profit after tax was shown at Rs. 343.57 lakhs. From the computation of total income, the Assessing Officer observed that the assessee had returned income at Rs 3.82 lakhs only after claiming the exemption of dividend income under section 10(33) on gross dividend receipts of Rs. 319.67 lakhs and of interest on debentures under section 10(23G) on the gross receipt of Rs. 24.92 lakhs. It was observed by the Assessing Officer that the assessee had incurred various expenses but no disallowance was offered under section 14A of the Act. He held that part of the expenditure incurred by the assessee-company was attributable to the activities of earning exempt income of such a h....
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....owance under section 14A. She submitted that the question of disallowance of direct and indirect expenses under this section now stands decided by the Special Bench of the Tribunal in the case of ITO v. Daga Capital Management Pvt. Ltd. [2008] 312 ITR (AT) 1 (Mum) ; 119 TTJ 289 in which it has been held that sub-sections (2) and (3) of section 14A are also retrospective and accordingly disallowance is called for under section 14A read with rule 8D. We have heard the rival submissions and perused the relevant material on record. First we take the plea of the learned authorised representative that the Departmental appeal deserves to be dismissed as not maintainable since the tax effect is Rs. 1,25,748. It is an admitted fact that the Revenue had filed appeal on August 9, 2004. Instruction No. 2 of 2005 dated October 24, 2005 states that it shall come into effect from October 31, 2005. In paragraph 2 of this instruction, it has been mentioned that "in partial modification of the above instruction, it has now been decided by the Board that appeals will henceforth be filed only in cases where the tax effect exceeds the revised monetary limits given hereunder". Such limit for filing a....
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....In so far as the filing of the Departmental appeals before the Tribunal is concerned, the limit of tax effect as per this instruction, is Rs. 1 lakh. In other words if the tax effect involved in the Departmental appeal before the Tribunal is more than Rs. 1 lakh, then the appeal will be maintainable and in the converse situation, it cannot be filed. From the ground of appeal and the computation of tax effect filed on behalf of the assessee it is observed that the tax effect in this case is obviously more than Rs. 1 lakh though less than Rs. 2 lakhs. Now the question before us is to decide as to whether the earlier instruction dated March 27, 2000 would apply or the later instruction dated October 24, 2005. On going through the later instruction it is found to have been mentioned that it will come into force with effect from October 31, 2005. It is stated in paragraph 2 that the "appeals will henceforth be filed" only in cases where the tax effect exceeds the revised monetary limits. On a cursory look at this instruction it becomes apparent that the embargo has been placed on the Revenue for not filing the appeals before the Tribunal after October 31, 2005 where the tax effect is....
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....adjudication on the merits notwithstanding the fact that the later instruction might have prospectively changed the scenario by enhancing the monetary ceiling of tax effect. The reference to the "other Division Bench" in the remarks of the court that "we would not be inclined to follow the view taken by the other Division Bench, regarding the earlier circular" refers to the case of CIT v. Pithwa Engg. Works [2005] 276 ITR 519 (Bom). Thus it is noticed that the hon'ble jurisdictional High court in Chhajer Packaging and Plastics P. Ltd. [2008] 300 ITR 180 (Bom) has not concurred with the earlier view expressed in Pithwa Engg. Works (supra) and sounded a contra note. Now the position which prevails before us is that there is one judgment in the case of CIT v. Pithwa Engg. Works [2005] 276 ITR 519 (Bom) dated July 1, 2005, according to which the instruction prescribing the monetary limit is applicable even to old references ; and on the other hand the judgment in the case of Chhajer Packaging and Plastics P. Ltd. [2008] 300 ITR 180 (Bom) dated September 28, 2007 rules that the instructions laying down the monetary limits for filing appeals are prospective and do not apply to pending....
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.... income earned by the assessee who is engaged in the business of dealing in shares and securities. It was argued before some of the Benches that the provisions of section 14A cannot apply to a dealer in shares whose earning of the dividend income is incidental to the trading in shares. Thereafter the Special Bench was constituted on this question. Jettisoning this plea the Tribunal has held that disallowance under section 14A is called for even in the case where the assessee is engaged in the business of purchase and sale of shares. This decision is an authority for sustaining the disallowance even in respect of traders in shares when exempted dividend income is earned by them. It does not oust the applicability of section 14A on dividend income which is earned by the assessee on shares held by it as investment. It is apparent from paragraph 3 of the majority view in which it has been mentioned (page 31 of 312 ITR (AT)) : "however, there is no controversy about the rightness in making the disallowance of expenses under section 14A when the shares and other securities are held as investment and not as stock-in-trade". It is, therefore, palpable that the disallowance under section 14....