TaxTMI 
TaxTMI 
2014 (7) TMI 989
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.... income of Rs. 10,69,341/- which has been claimed as exempt. The AO found that the assessee itself has disallowed a sum of Rs. 3,40,304/- u/s 14A by applying Rule 8D without allocation of interest expenses towards earning of exempt income. The AO made disallowance under Rule 8D which resulted addition of Rs. 20,69,704/- inclusive of the amount of Rs. 3,40,304/- disallowed by the assessee u/s 14A. 2.1 On appeal the assessee contended before CIT(A) that it has not incurred any interest expenditure for earning dividend income because it had sufficient own funds upto three times of the investment. The assessee has placed reliance on the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. Reliance Utilities & Power Ltd (313 ITR 340). The CIT(A) did not accept the contention of the assessee and confirmed the disallowance made by AO. 2.2 Before us, the Ld AR of the assessee has submitted that the assessee does not press the disallowance on account of administrative expenses and the grievance of the assessee is confined only to the expenditure disallowed u/s 14A on account of interest expenditure. The Ld. AR of the assessee has contended that the assessee's own f....
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....e, the assessee's own funds are more than sufficient to source the investment particularly in view of the fact that the loan during the year are reduced to Rs. 4,94,000/- from Rs. 8,49,000/-. Therefore, when there is no increase in the loan during the year then the use of borrowed funds for the purpose of investment does not borne out from the facts of the case. Accordingly we are in agreement with the finding of this Tribunal for the A.Y. 2006-07 and hold that no interest expenditure can be disallowed u/s 14A as the assessee has its own funds sufficient to source the investment in question. 5. For the A.Y. 2008-09 the Revenue has raised the following grounds:- i. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made on account of penalty of Rs. 11,29,599/ - on violation of the bye-laws of the stock exchange, which are statutory in character and thus mounted to infringement of law". ii. "On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in ignoring the fact that the penalty is imposed under SEBI [procedure for holding enquiry and imposing penalty ....
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....cumstances of the case and in law the Tribunal was justified in deleting the additions made by the AO under proviso to section 37(1) of the I.T. Act, 1961 being penalty imposed by the National Stock Exchange on the assessee. 9. The Hon'ble High Court thus held that "as regards the second quest ion is concerned the finding of fact recorded by the CIT(A) and upheld by the ITAT is that the payments made by the assessee to the Stock Exchange for violation of their regulation are not on account of an offence or which is prohibited by law and the invocation of explanation to Sec. 37 of the I.T. Act 1961 is not justified and accordingly declined to entertain the second question. Respectfully following the decision of the Hon'ble Bombay High Court in the case cited above, we do not find any infirmity in the finding of Ld. CIT(A) and accordingly the finding of CIT(A) is confirmed." 5.3 Since the issue is now covered by the decision of Hon'ble High Court in the case of CIT Vs. Stock and Bond Trading Co. which has been followed by the Tribunal for A.Y. 2007-08, therefore, following the earlier orders of this Tribunal, we decide this issue against the revenue a....
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....brought on statute. After considering the relevant provisions, the Tribunal has held in para 6 as under:- "6. Under clause 98, charge of securities transaction tax is fastened on purchase/sale of equity shares in a company or an unit of equity oriented fund, as well as sale of derivative and sale of units. It clearly states that the tax is payable either by the "Purchaser" or the "Seller". The assessee in this case is neither the purchaser nor the seller. He is merely a collecting agent of STT on behalf of the Government. Thus the assessee has both collected the amount and paid the same to the Government. The assessee being a broker has neither purchased shares on its own nor sold shares on its own. It was only an intermediary. Thus in our considered opinion, section 40(a)(ib) of the Act does not get attracted in this case nor section 88E benefit can be extended to the assessee in this case. Only when the purchaser or the seller claims a deduction of STT paid, then only 40(a)(ib) is attracted. The observations of the learned CIT(Appeals) that this is tax planning or a colourable device, in our considered opinion, is devoid of merit." 7.3 Following the decision ....
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....'ble Jurisdictional High Court in the case of CIT Vs. Shreyas S. Morakhia (supra) we uphold the order of CIT(A) qua this issue. 9. For A.Y. 2009-10 the assessee has raised the only ground as under:- "On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) has erred in confirming the disallowance of Rs. 46,17,785/- u/s 14A on account of the expenses attributable to earning the exempt income. The appellant prays that the disallowance of Rs. 46,17,785/- may kindly be deleted as the same is bad in law." 9.1 The Ld. AR of the assessee has submitted that the grievance of the assessee is only with respect to the disallowance of interest expenditure u/s 14A. This ground is common to the ground involved in the assessee's appeal for A.Y. 2008- 09. 9.2 We have heard the Ld. AR as well as Ld. DR and considered the relevant material on record. We note that the assessee's own fund is more than the investment in question. The assessee has also raised an additional plea that the interest received by the assessee is more that the interest paid, therefore, no disallowance could be made on account of interest expenditure u/s 14A. In supp....