TaxTMI 
TaxTMI 
2010 (12) TMI 461
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....d therefore to be disallowed under the provisions of section 14A of the Income Tax Act 1961 (the Act). 2. The assessee is a company. It carries on the business of a commodity exchange. The activities of the exchange are carried on by members of the exchange on an electronic platform and infrastructure provided by the exchange. The activities of the members are supervised and monitored by the Assessee. The Assessee has framed rules and regulation for trading on the exchange. All the members of the exchange are governed by the Government regulator, viz., forward market commission. The major source of income of the exchange is membership fee on grant of membership to new members, annual recurring fees and transaction processing charges....
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.... the indirect expenses to earn dividend income at Rs.71,744/-, Rs.2,70,837/- and Rs.4,34,677/- for assessment year 2005-06, 2006-7 and 2007-08 respectively. The indirect expenses which were considered by the assessee while making the aforesaid disallowance on its own was salary expenses being cost of employees who take decision of making investment/dis-investments and the cost of employees carrying on accounting entries of such transactions. Besides the above the assessee also considered rent, telephone and fax charges and conveyance expenses while making the aforesaid disallowance on its own. The Assessing Officer however, invoking the provisions of Rule 8D of the Income Tax Rules made a disallowance of expenses under section 14A of the Ac....
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.... income of the assessee. Consequently, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to such income which does not form part of the total income under the Act, by virtue of the provisions of Section 14A(1); ii) The payment by a domestic company under Section 115O(1) of additional income tax on profits declared, distributed or paid is a charge on a component of the profits of the company. The company is chargeable to tax on its profits as a distinct taxable entity and it pays tax in discharge of its own liability and not on behalf of or as an agent for its shareholders. In the hands of the shareholder as the recipient of dividend, income by way of dividend does not form part of the total....
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.... from mutual funds which does not form part of the total income as contemplated under Section 14A. The Assessing Officer can adopt a reasonable basis for effecting the apportionment. While making that determination, the Assessing Officer shall provide a reasonable opportunity to the assessee of producing its accounts and relevant or germane material having a bearing on the facts and circumstances of the case. 6. In view of the aforesaid decision of the Hon'ble Bombay High Court t he provisions of Rule 8D of the Income Tax Rules which have been notified with 2008-09. Even prior to Assessment Year 2008-09, when Rule 8D was not applicable, the Assessing Officer has to enforce the provisions of sub section (1) of Section 14A. For that p....