TaxTMI 
TaxTMI 
2012 (12) TMI 206
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....mposed by the A.O. of Rs.52,68,269/- u/s 271(1)(c) of the Act. 2. Regarding Ground No.1 of the quantum appeal, Ld. D.R. supported the assessment order whereas the Ld. A.R. supported the order of Ld. CIT(A). He submitted that the assessee had made provisions in respect of premium payable on deep discount bonds issued by the assessee company which are redeemable after 6 years and hence, in the present year, deduction was claimed for the 1/6th of the total amount of redemption premium to the extent of Rs.5 crores as against total Rs.30 crores payable after 6 years. He further submitted that this provision made by the assessee company is in line with the judgement of Hon'ble Apex Court rendered in the case of Madras Industrial Investment Corporation Ltd. as reported in 225 ITR 802. He further submitted that in the subsequent year, these deep discount bonds were redeemed premature as per option exercised by bond holders and the assessee credited the income of Rs.2.30 crores in the accounting year ended on 31.03.2002 i.e. the next year and the same was offered to tax in that year and hence, no disallowance is justified in the present year. Reliance was placed on the judgment of Hon'bl....
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.... of trading in plastic, shares, securities and consultancy". Obviously, even as per the Assessing Officer the assessee is trader in shares and securities. For a trader in shares and securities the whole of interest expenditure is allowable as deduction in the computation of business income itself, in view of the Gujarat High Court decision in. the case of Cotton Fabrics 131 ITR 99. During the course of appellate proceedings, the appellant also relied on the decision of Bombay IT AT in the case of Mafatlal Holdings Ltd., dated 23-04- 2003 and stated that dividend income is not exempt and disallowance u/s. 14A is not justified. Alter carefully considering the submissions of the counsel of the appellant, it is noticed that before the Gujarat High Court, there was no question of effect of Sec. 14A being considered because that provision was not on the statute book when the said decision was rendered, Similar!}', in the case of Mafatlal Holdings Ltd. also, the applicability of sec. 14A was not discussed. In the alternative, the counsel of the appellant has argued that the disallowance of interest amounting to Rs. 3,72.88,743/- is excessive. I have also considered the submissions m....
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....ucing shares held as stock in trade of Rs.5,44,89,529/- from the amount of total investment for computing the amount of interest to be disallowed as against the ratio laid down by the special bench of the Tribunal in the case of Daga Capital Management (P) Ltd. as reported in 119 TTJ 289 (Mum.) (SB). In that case, it was held by the special bench of the Tribunal that even for shares held as stock in trade, disallowance has to be made u/s 14A. Hence, the amount of such investment cannot be reduced to compute the amount of interest to be disallowed as has been done by Ld. CIT(A). This aspect of the order of Ld. CIT(A) is reversed and the A.O. is directed to compute the interest to be disallowed u/s 14A @ 6.57% of Rs.23,38,40,647/- (Rs.24,85,91,626 - Rs.1,47,50,979). This ground is partly allowed. 7. In the result, appeal of the revenue in I.T.A.No. 3475/Ahd/2004 is partly allowed. 8. Now, we take up the appeal of the revenue in respect of penalty partly deleted by Ld. CIT(A) in I.T.A.No. 750/Ahd/2007. In respect of this penalty appeal, Ld. D.R. supported the penalty order whereas the Ld. A.R. of the assessee submitted that no penalty is justified in the present case. ....
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....cept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(21)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the A.O. for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature." 10. In the present case also, it is not pointed out before us that any details of expenditure or income filed by the assessee was incorrect. Since the facts are similar, we find that in the present case, this judgment of Hon'ble Apex Court is squarely applicable and by respectfully following the same, we feel that no penalty is justified in respect of disallowance made by the A.O. u/s 14A of the Income tax Act, 1961. There is no penalty on any other disallowance and hence, we do not find any reason to interfere in the order of Ld. CIT(A) on this issue. 11. In the result, the penalty appeal of the revenue is dismissed. 12. Now, we take up the cross objection of the assessee in ....