TaxTMI 
TaxTMI 
2015 (12) TMI 140
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....od interest is not allowed as business expense, then broken period interest should be allowed as cost of acquisition of such securities. Any long term capital gain (LTCG) on sale of such securities should be taxed @ 20% after allowing indexed cost of acquisition (currently profit on sale of such securities are taxed @ 30% as business income.) 3. The first ground relates to the disallowance made u/s. 14A of the Act. 3.1. This issue has been considered by the AO at page-10 in para-5 of his order wherein the AO observed that the assessee has both exempt income yielding investment as well as business assets in the balance sheet. The AO further found that the assessee maintains a consolidated account. The assessee was asked to show cause as to why disallowance u/s. 14A of the Act r.w. Rule 8D should not be made. The assessee claimed that disallowance of Rs. 99,865/- should suffice the provisions of Sec. 14A. It was claimed that the Rule 8D is not applicable. It was further claimed that the assessee can earn both tax free as well as taxable income from the same investments cannot be considered to calculate disallowance under Rule 8D. The submissions of the assessee did not find favour....
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....f dividend income from shares held as stock in trade. While holding so,it has been observed by the Tribunal that the investment component or element is in built in the expenditure incurred for purchase and sale of shares even held as stock in trade for business purposes. The expenditure attributable towards earning of exempt income, immaterial of the fact whether such exempt income was actually earned or not, is embedded in the expenditure incurred for share trading activity and is liable to be apportioned in the light of the provisions of section 14A of the Act. The decision of the Hon'ble Karnataka High Court relied upon by the assessee has been duly discussed and distinguished in the Third Member Case of "D.H. Securities (P) Ltd. vs. DCIT"(supra). However, it has been further observed in the said Third Member decision of the Tribunal that the shares which yield tax exempt dividend income, interest qua which is to be disallowed, when held as stock in trade, yield taxable income also. In fact, the shares are bought and held primarily for the purpose of earning income from trading in shares. Hence, while calculating the interest disallowance under Rule 8D(2)(ii), the disallowance....
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.... 8D is, accordingly, restricted to 5% of the amount arrived at under Rule 8D(2)(ii) and 10% of the amount calculated by the A.O. under Rule 8D(2)(iii)." 8. The Tribunal further observed as under: "Therefore, the disallowance computed under Rule 8D of the Income Tax Rules cannot be more than the actual expenditure incurred by the assessee for the dividend income excluding the activity of share trading which is the business activity of the assessee. Even the computation of disallowance arrived as per the Rule 8D should be restricted only to the extent of actual expenditure or to the extent of the expenditure which can be attributable to the activity of the dividend income excluding the business activity of share trading. Accordingly, we direct the Assessing Officer to re-compute the disallowance u/s 14A with the rider to the actual expenditure which can be attributable to the receipt or earning of the dividend income excluding the expenditure related to business activity of share trading." Respectfully following the findings of the Co-ordinate Bench, we direct the AO to recompute the disallowance u/s. 14A with the rider to the actual expenditure which can be attributable to the ....
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....v. CIT reported in [2002] 258 ITR 601 (Bom). On going through the said judgment, we find that question (B) reproduced above and projected as substantial by Mr. Suresh Kumar is squarely answered by the judgment of this court in the case of American Express International Banking Corporation (supra). In view thereof, we do not find that even question (B) gives rise to any substantial question of law that needs to be answered by this court. 12. As the issue has been decided in favour of the assessee and against the Revenue, we set aside the findings of the Ld. CIT(A) and direct the AO to delete the addition of Rs. 11,50,42,776/- in the light of the decision in the case of HDFC Bank (supra). Ground No. 2 is accordingly allowed. 13. Ground No. 3 is without prejudice claim relating to ground No.2. Since we have deleted the addition in ground No.2, ground No. 3 become otiose. 14. In the result, the appeal filed by the assessee is partly allowed. ITA No. 615/Mum/2014 - Revenue's appeal 15. Grievance of the Revenue read as under: On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing relief to the assessee to the extent impugned in the g....
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....having being put to use. We, therefore, allow ground No.1 of the assessee's appeal and dismiss both the grounds of the department's appeals." 11. As the AO has followed the findings given in earlier assessment year and as the disallowance have been deleted by the Tribunal in earlier assessment years vide its order (supra), we do not find any reason to interfere with the findings of the Ld. CIT(A). Ground No. 1,2 & 3 are accordingly dismissed. 12. Ground No. 4 relates to the deletion of the addition of Rs. 10,64,19,514/- on account of amortization of premium on HTM Securities. 12.1. This issue has been considered by the AO at para-4 of his order wherein the AO observed that on the claim of Rs. 10,64, 19,514/- being amortisation of premium on HTM securities. The assessee was asked to explain why the same should not be disallowed as there is no provision in the Act for such deduction. The AO further at para- 4.4. on page-9 of his order observed that a similar claim has not been accepted by the Department in the case of HDFC bank and keeping in view the stand taken by the Department in the case of HDFC Bank expense of Rs. 10,64,19,514/- was added back to the total income of the ass....