2015 (12) TMI 1456

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....te books of account and that its entire business operations, including business which yielded exempt income, were run with common pool of funds necessitating invoking of Rule 80 of Income Tax Rules, 1962 to determine expenditure attributable to earning of exempt income. (3) The Learned Commissioner of Income-tax (Appeals) erred in not appreciating that the interest of Rs. 99.69 Lakhs could not be said to have been incurred only for earning the taxable income and not exempt income and as such, the assessee had incurred interest expenditure & other administrative expenses for the purpose of earning exempt income, thereby justifying the invoking of provisions of section 14A of the Act. (4) The appellant craves leave to add, alter or amend ....

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.... exempt income and for its business which is yielding taxable income. The assessee is having common pool of funds for its entire business operations including the business which is yielding exempt income, therefore, the expenditure attributable to earning of exempt income can only be reasonably determined by invoking Rule 8D. Since the dividend is exempt from tax, expenditure incurred to invest in shares is not allowable as deduction, even if assessee is engaged in the business of trading in shares. He observed that assessee has an investible capital of Rs. 1.51 crores and the turnover in shares is Rs. 24 crores and the closing stock as on 31-03-2010 is Rs. 14.16 crores. The assessee has investible surplus of only Rs. 1.51 crores and the ba....

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....end income on shares which are held as stock in trade. He accordingly submitted that this being a covered matter in favour of the assessee the grounds raised by the Revenue should be dismissed. 9. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that assessee in the instant case is engaged in the business of share trading. The dividend income has been earned on shares which are held as stock in trade. According to the AO the provisions of section 14A r.w. Rule 8D are applicable on exempted dividend income on shares even if they are held as st....

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....hare trading business of the assessee. Thus, no disallowance u/s. 14A is warranted on dividend earned on shares held as stock-in-trade. Our view is fortified by the decision of Mumbai Bench of the Tribunal in ITA No. 6711/Mum/2011 in the case of DCIT Vs. M/s. India Advantage Securities Ltd. for the assessment year 2008-09 decided on 14-09-2012. In the said case, the assessee had received dividend income of Rs. 1,40,859/- on shares shown as stock-intrade in the books of account of the assessee. The assessee had not made any disallowance of expenses relating to exempt income. The Assessing Officer made disallowance u/s. 14A r.w. Rule 8D. The Commissioner of Income Tax (Appeals) held that disallowance under Rule 8D could be made only with resp....