TaxTMI 
TaxTMI 
2015 (11) TMI 1013
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....3. The first common issue in this appeal of revenue and CO of the assessee is as regards to the order of CIT(A) in restricting the disallowance at Rs. 27,235/- as against the disallowance made by AO at Rs. 11,47,078/- qua exempted income by invoking the provisions of section 14A of the Act read with Rule 8D of I. T. Rules, 1962 (hereinafter referred to as the "Rules"). For this, revenue has raised the following ground no.1 and assessee has raised following ground no.2: Revenue's ground: "1. That on the facts and in the circumstances of the case, Ld. CIT(A) erred in law in deleting the disallowance of Rs. 11,47,078/- made u/s. 14A of the I. T. Act and the order of the CIT(A) should be set aside and the order of the Assessing Officer should be restored. Assessee's ground: "2. For that the Ld. CIT(A) erred in confirming the addition of Rs. 27,235/- as expenses related to the earning of exempted income when the Ld. AO did not record any satisfaction about the correctness of the claim of the assessee and in any case the disallowance retained by the Ld. CIT(A) is excessive." 4. Briefly stated facts are that the AO during the course of assessment proceedings noticed from the acco....
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....ll of them were pronounced by the Hon'ble Appellate Authorities before the commencement of Rule 8D of the I. T. Act, 1961 which is applicable from the Asstt. Year 2008-09. In the facts and circumstances of the case, it is held that the assessee has not made any investments or direct expenditure for earning dividend and the earning of dividend is incidental to the M/s. Crosses Capital Services Pvt. Ltd. AY 2008-09 main business of the assessee. However, there are expenses which cannot be quantified exactly but by estimation 10% of the exempted income is disallowed as expenses pertaining to earning of dividend (exempted) income. Therefore, the disallowance of Rs. 27,235/- for earning dividend of Rs. 2,72,349/- is upheld. The appeal of the assessee is partly allowed on this ground." Aggrieved, now assessee and revenue both are in appeal before Tribunal. 5. At the outset, Ld. Counsel for the assessee argued that there is no satisfaction recorded by the AO for application of provisions of section 14A of the Act read with Rule 8D of the Rules. Ld. Counsel for the assessee stated that the AO has disallowed the sum of Rs. 11,47,078/- by mechanically calculating the figures solely on....
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....e correctness of the accounts of the assessee is necessary. The Tribunal in REI Agro Ltd., supra has held as under: "7.1 In any case, the working of the disallowance under sub-part (ii) of subclause (2) of rule 8D as made by the AO also suffers from a substantial error in so far as in the said rule in regard to the numerator B, the words used are the average value of the investment, income from which does not form or shall not form part of the total income as appearing in the balance-sheet as on the first day and in the last day of the previous year. Here the AO has taken into consideration the investment of Rs. 103 crores made this year, which has not earned any dividend or exempt income. It is only the average of the value of the investment from which the income has been earned which is not falling within the part of the total income that is to be considered. This is why the question of satisfaction is provided in section 14A and rule 8D(1), that relates to the accounts of the assessee. Thus, it is not the total investment at the beginning of the year and at the end of the year, which is to be considered but it is the average of the value of investments which has given rise to t....
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....emained unsold with the assessee. It is those unsold shares which have yielded dividend, for which the assessee has not incurred any expenditure at all. Though the dividend income is exempted from payment of tax, if any expenditure is incurred in earning the said income, the said expenditure also cannot be deducted. But in this case, when the assessee has not retained shares with the intention of earning dividend income and the dividend income is incidental to its business of sale of shares, which remained unsold by the assessee, it cannot be said that the expenditure incurred in acquiring the shares has to be apportioned to the extent of dividend income and that should be disallowed from deductions. In that view of the matter, the approach of the authorities is not in conformity with the statutory provisions contained under the Act. Therefore, the impugned orders are not sustainable and require to be set aside." Similar are the facts of the present case before us that the assessee undisputedly dealing in the shares and securities as admitted by AO itself while mentioning the nature of business as "dealing in shares and securities". This earning of dividend on such shares is mere....
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....sis of turnover and income basis as per the computation submitted by the assessee. For this, CIT(A) held in para 11, 12, 13 and 14 as under: "11. I have duly considered the observations of the Assessing Officer in the assessment order and written submissions of the assessee. The Assessing Officer has calculated rebate u/s. 88E of the Income-tax Act, 1961, by taking the net income from STT transactions at an amount of Rs. 10,70,66,490/- and reduced the gross income shown under the head 'brokerage, dividend and interest' amounting to Rs. 75,46,819/-. In this manner, the Assessing Officer has calculated that the income relating to STT transactions amounts to Rs. 5,95,19,671/- only. The assessee, on the other hand, submitted that the entire expenditure of the P/L A/c thereby has been deducted from the income relating to STT transactions. He has submitted that the expenses are to be apportioned from the gross income originating to the assessee from brokerage and share transactions business of the assessee including F&O. It is right that the expenses in the P/L A/c are incurred for earning of the al1 the three types of income i.e., brokerage, share trading and interest. Since di....
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.... Rs. 1,62,25,924/- Rs. 8,98,99,270/- STT Paid Rs. 3,32,34,833/- 30% of income from STT relating transaction Rs. 2,69,69,781/-" Aggrieved, revenue as well as assessee both came in appeal before Tribunal. 10. We have heard rival submissions and gone through facts and circumstances of the case. Admittedly, assessee is a dealer in shares having large turnover in business of brokerage. The assessee is a registered broker with NSE. The AO while computing the income from different business segments apportioned the business expenses on the basis of proportionate income under different business segments and accordingly, computed the income from operations for the purpose of determining income from share business segments for the purpose of computation of rebate u/s. 88E of the Act. Further, CIT(A) restricted rebate u/s. 88E of the Act after apportioning the expenses as noted above (the findings of CIT(A) are reproduced as it is). We find that the CIT(A) required the assessee to give calculation of the turnover in different business segments and found that the turnover of share business segment to the gross turnover was 5.87% under the head own business turnover in....