TaxTMI 
TaxTMI 
2014 (9) TMI 1215
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....eleting the disallowance of Rs. 31,90,231/- made u/s 14A of the Income Tax Act and the order of the CIT(A) should be set aside and the order of the Assessing Officer should be restored on this issue. 2. That on the facts and circumstances of the case, Ld.CIT(A) erred in law in deleting the disallowance of Rs. 4,24,650/- under the head Penalty. The order oft eh CIT(A) should be set aside and the order of the Assessing Officer should be restored on this issue. 3. That the appellant craves for leave to add, delete or modify any of the grounds of appeal before or at the time of hearing." 3. Apropos : Disallowance u/s 14A of the Act : On this issue the AO observed that the assessee company derived dividend income of Rs. 12,3....
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....the ld. CIT(A) held that the AO has treated the entire depository charges as relatable to exempt income. The ld. CIT(A) accepted the assessee's contention in this regard that the assessee was maintaining separate demat account for minor transactions of investment in securities. The ld. CIT(A) accordingly held as under :- "Thus, the disallowance u/s 14A is calculated as below :- Amount (Rs.) 1. Amount of expenditure directly relating to income which does not form part of total income (demat charges) 2,530/- 2. Interest paid during the year A 42,88,500/- Opening balance in investments of shares (as on 1.04.2007) 3,17,74,155/- Closin....
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.... the income derived therefrom is offered to tax as business income. The remaining 37 per cent of the shares are retained. It has remained 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 ap....
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....t penalty charges for various types of defaults. AO further observed that as per decision of Bombay High Court in the case of Hemendra V.Shah vs stock exchange Bombay, reported in page 770 of Maharashtra Law Journal 1995 (Vol.2), the Rules and Regulation of stock exchanges are statutory in character. The said Rules have the force of statute and are deemed to be incorporated as part of statute. Therefore, AO held that penalty charges paid to NSE is to be considered as infringement of law and thus, are in admissible expenses in terms of explanation below Section 37. Considering the above, the total sum of Rs. 5,73,839/- was disallowed. 7. Upon assessee's appeal the ld. CIT(A) observed that the assessee has submitted that the penalties are ....
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....d fines paid to the Stock Exchange which as follows :- S.NO. PARTICULARS AMOUNT 1. VIOLATION OF MARKET WIDE POSITION LIMIT 3,81,955.36 2. NON SUBMISISON OF UCC 5,100.00 3. SHORT DELIVERY 25,995.42 4. NON UNLOADING OF CTCL 9,500.00 5. NON SUBMISIKSON OF CLIENT FUNDING 2,100.00 6. OTHERS 1,49,188.88 TOTAL 5,73,839.63 7.2. Therefore, ld. CIT(A) held that following the judgment of the Hon'ble Income Tax Appellate Tribunal, Kolkata Bench and submissions of the assessee, the penalty charges paid by the assessee are allowed as expenditure except Rs. 1,48,189/- for which the assessee has not given any details. Thus the penalty charge and fine amounting to Rs. 4,....