2011 (4) TMI 861

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....2003, for the Assessment Year 1998-99 thereby dismissing the appeal filed by the assessee against the order of the Commissioner of Income-tax (Appeals).   2. The facts giving rise to filing of this appeal may be summed up thus:   a) The assessee had earned dividend income of Rs.2,40,501/- apart from the income from trading in share, interest and commission. The Assessing Officer found that the assessee had claimed interest amounting to Rs.12,96,597/- and that the interest payment was attributable to investment in share from which income is exempted under Section 10(34) of the Income-tax Act. He, therefore, worked out the interest disallowance by applying the formula: Interest paid X Investments in shares/Total loan over which in....

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....for its indivisible business of trading in shares, granting loans and advances and investing in shares was allowable as a deduction under Section 36(1) (iii) and no part thereof could be disallowed by applying the principle of apportionment or as incurred in relation to the dividend income falling under section 10 (33)?"   "iii) Whether on a true and proper interpretation of the provisions of sections 115 O and/or 14A of the Income-tax Act, 1961 and/or the circular dated July 23, 2001 issued by the Central Board of Direct Taxes, the appellant is entitled to deduction of interest amounting to Rs.1,68,005/-."   5. Mr. Khaitan, the learned senior Advocate appearing on behalf of the appellant, has criticized the orders of the author....

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....xempt income. Mr. Khaitan submits that in the case before us, the approach of the Tribunal below was totally erroneous as the Assessing Officer failed to determine the proportion of expenditure incurred in relation to earning of exempt income by taking a reasonable approach. 7. Mr. Sarkar, the learned advocate appearing on behalf of the Revenue, has, on the other hand, supported the order passed by the Tribunal and has contended that the assessee itself having failed to produce material in support of its contention, the Assessing Officer rightly assessed the deductible income on proportionate basis. Mr. Sarkar submits that the same is in conformity with Rule 8D of the Income-tax Rule and thus, we should not interfere with the order passed ....

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.... benefit of proportionate deduction.   10. In our opinion, the mere fact that those shares were old ones and not acquired recently is immaterial. It is for the assessee to show the source of acquisition of those shares by production of materials that those were acquired from the funds available in the hands of the assessee at the relevant point of time without taking benefit of any loan. If those shares were purchased from the amount taken in loan, even for instance, five or ten years ago, it is for the assessee to show by the production of documentary evidence that such loaned amount had already been paid back and for the relevant Assessment Year, no interest is payable by the assessee for acquiring those old shares. In the absence o....