TaxTMI 
TaxTMI 
2012 (11) TMI 1166
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....se and in law, the Ld CIT (A) erred in holding that the figures of opening and closing stock cannot be considered for working the disallowance u/s 14A of the Act. (ii) on the facts and in the circumstances of the case and in law, the Ld CIT (A) failed to appreciate that as per the Hon'ble ITAT's decision in the case of Daga Capital Managements Pvt. Ltd. Section 14A would be applicable where shares are held as stock-in-trade. 2. The appellant prays that the order of the CIT (A) on the above grounds be set aside and that of the Assessing Officer be restored." 3. During the proceedings before us, Dr. K. Shivaram, Ld Counsel made an application under Rule-27 of the Income Tax Appellant Tribunal Rules, 1963 raising an object....
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....hs. 4. On the other hand, Ld DR relied on the order of the Revenue Authorities. Further, as per Ld DR, request for not invoking the provisions of section 14A in respect of the exempt dividend income is like asking for 'share of the cake and eat it too'. The assessee claimed exemption from tax in respect of the dividend income arising out of the shares held as stock in trade in view of the provisions of section 10 and not accepting for any disallowance of expenditure u/s 14A of the Act. He however, displayed his respect for the cited judgment of Hon'ble Karnataka High Court. 5. We have heard both the parties, perused the orders of the revenue, the papers available on record and the decisions cited by the Ld Counsel to support the conte....
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....n to the exempt dividend income received from shares held on trading account. The AO disallowed the expenses holding that the provisions of section 14A were applicable even in relation to the dividend received from the trading shares. The Ld CIT (A) has however held that the provisions of section 14A will not apply to the shares held on trading account. The Revenue has placed reliance on the decision of Mumbai Bench of the Tribunal in the case of M/s. American Express Bank Limited (supra) in which the Tribunal has held that the expenditure u/s 14A has to be disallowed even in respect of dividend income received from trading shares. The Tribunal followed the decision of Special Bench of the Tribunal in the case of ITO vs. Daga Capital Manage....
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....ase of trading shares u/s 14A of the IT Act in the case of CCL Ltd. vs. JCIT (supra). The assessee in that case was distributor of state lotteries and dealer in shares and securities. The assessee had taken loans for the purchase of certain shares and it had incurred expenditure for broking the loans which had been disallowed under Rule 8D by the AO and confirmed by the Ld CIT (A). The Tribunal agreed with the authorities below that the expenditure relation to earning of dividend income though incidental to the trading in shares was also to be disallowed u/s 14A of the IT Act. The Tribunal however, had observed that the entire broking commissions was relatable to earning of dividend income as the loan had been utilized for the purchase of s....
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....leting the disallowance u/s 14A computed by the AO in relation to the stock-in-trade. The order of the Ld CIT (A) is accordingly upheld." 7. Further, it is a fact that the assessee offered disallowance u/s 14A at Rs. 5,64,531/-. In this regard, Ld DR raised an argument that the assessee having offered for disallowance u/s 14A is bound to offer in accordance with the provisions of Rule 8D. This argument was considered by the CIT(A) in his order vide para 2.3. We perused the order of the CIT (A) and the contents of the said Para 2.3 and find the reasoning given by the CIT(A) therein is quite reasonable. The contents of the said para are reproduced as under: "The AO considered the opening balance of investment at Rs. 13.36 crores a....