TaxTMI 
TaxTMI 
2014 (11) TMI 759
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....ng disallowance u/s. 14A of the I.T. Act, of Rs. 6,86,479/-." 3. The facts of the case as narrated by the Assessing Officer are as under: "It is seen that the assessee has earned dividend income to the tune of Rs. 49,559/- which is exempt from tax. The assessee has made investment of Rs. 2,00,00,000/- as on 31/3/2007. It is further seen that the assessee, being engaged in trading of shares and securities, has shares and securities to the extent of Rs. 17,79,181/-as inventories as on 31/03/2007. The assessee has taken loans of Rs. 2,92,25,3261- on which interest of Rs. 12,20,237/- has been claimed by the assessee. In addition to this, some administrative/other expenses must be incurred to earn tax free income. Therefore, some disallowance ....
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.... in earning the tax free income. By the assessee's very own admission, a certain interest expense has been incurred by the assessee in relation to tax free income, meaning thereby that funds were borrowed for the purpose of investment. Borrowing of funds itself entails various administrative costs. The assessee's contention that for invoking provision of sec.14A (2), expenditure is required to be identified by the AO. This contention of the assessee is also misplaced. Sec. 14A r.w. Rule 8D does not require specific identification of expenses. The said provisions only specify that where AO is not satisfied with the correctness of claim of the assessee in respect of expenditure in relation to tax free income, the AO shall determine the q....
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.... "Trading in Bullion, Trading and Speculation in shares and securities, Mutual Funds Commodities and Derivatives. (Letter dtd. 2/11/2009 Annexure 'A') Hence Provisions of sec. 14-A are not applicable. Support is claimed from the case of Leena Ramchandran (ITA No. 1784 of 2009 - order dtd. 14/6/2010) (4) No efforts are made by any body including staff members to earn interest income. (5) Rule 8D: (a) Rule 8D is not applicable for this year as the same has been introduced w.e.f. 24/3/2008. (b) Rule 8D not Applicable as the same is not retrospective. (c) Year under appeal is ITAY 2007-08. (d) Rule 8D is introduced w.e.f. 24/3/2008 inserted by IT (Fifth Anndt.) Rule, 2008. Hence Rule 8D is not applicable for ITAY 2007-08. ....
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.... to the extent of Rs. 292.25 lakhs. Investment resulting in income is to the extent of Rs. 200 lakhs. Therefore it is clear that the borrowed funds were used in making investments resulting in exempt income. Appellant argued that it was involved in trading of shares and commodities and therefore income is taxable in business head and therefore income is taxable and disallowance under section 14A is not applicable. This argument of the appellant is not correct since trading involved inventory of only Rs. 17.79 Lacs which is hardly anything as compared to investment of Rs. 200 Lacs resulting in exempt income. Therefore it is clear that disallowance on account of interest and other expenses in respect of exempt income from investment in justif....
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....erused the orders of lower authorities and material available on record. The undisputed facts of the case are that the Assessing Officer observed that the assessee has earned dividend income of Rs. 49,559/-. The assessee has made investment of Rs. 200 lakhs on 31.03.2007. The assessee is engaged in trading of shares & securities and shares & securities of Rs. 17,79,181/- were held by the assessee as inventory on 31.03.2007. The assessee has taken loan of Rs. 2,92,25,326/- on which interest of Rs. 12,20,327/- was paid. Further, the assessee must have incurred some administrative expenses to earn tax free dividend income. Hence, some disallowance u/s. 14A of the Income Tax Act is warranted. The Assessing Officer further observed that Mumbai S....