2016 (12) TMI 45

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....s. 14A of the Income Tax Act, 1961 (hereinafter referred to as "the Act") r.w. Rule 8D in respect of dividend income earned by the assessee on shares and mutual funds held as stock-in-trade. 2. The brief facts of the case as emanating from records are: The assessee is engaged in the business of trading and dealing of shares, mutual funds, bonds and derivatives. During the impugned assessment years the assessee received dividend income on shares held as stock-in-trade. Assessment Year Dividend Income 2008-09 Rs. 92,55,832/- 2009-10 Rs. 46,06,943/- 2010-11 Rs. 45,28,366/-   The assessee made disallowance u/s. 14A in three impugned assessment years as follows : Assessment Year Disallowance u/s. 14A 2008-09 Rs. 15,592/- 200....

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....mmissioner of Income Tax reported as 159 ITD 554 has reiterated the law laid down by the Hon'ble Jurisdictional High Court. The Commissioner of Income Tax (Appeals) has erred in upholding the findings of Assessing Officer by placing reliance on the decision in the case of DCIT Vs. D.H. Securities (P.) Ltd. reported as 99 DTR (Mumbai) (TM) 298. The Hon'ble Karnataka High Court in the case of CCI Ltd. Vs. JCIT reported as 71 DTR 141 and the Hon'ble Allahabad High Court in the case of Additional Commissioner of Income Tax Vs. M/s. Dhampur Sugar Mill reported as 370 ITR 194 have held that no disallowance u/s. 14A is to be made where securities and shares are held as stock-in-trade or investment is made for business purpose. 4. On t....

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.... to the dividend income is against the provisions of section 10(23F). The dividend income has been specifically excluded in the Act, thus, it does not form part of total income. The question before us is : "Whether disallowance u/s. 14A is to be made on dividend received on shares held as stock in trade"? It is an undisputed fact that the shares are held by the assessee as stock-in-trade. The assessee has earned dividend income on such shares. The assessee has not held the shares for earning dividend income. Dividend income is incidental to the share 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 t....