NINJA SECURITIES P. LTD,MUMBAI vs. ITO 13(1)(1),

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद"य लेखा लेखा सद"य सद"य राजे"" सद"य राजे"" राजे"" केकेकेके अनुसार राजे"" अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order,dated 20/06/2016,of the CIT (A)-21,Mumbai, the assessee has filed the present appeal.Assessee-company, engaged in the business of computer software development and consultancy, filed its return of income on 27/ 09/2012,declaring loss of Rs. 22.59 lakhs. The Assessing Officer(AO)completed the assessment,u/s.143 (3)of the Act, on 18/03/2015, determining its income at Rs. 39.90 lakhs. 2.Effective ground of appeal is about confirming the disallowance of Rs. 21.13 lakhs u/s.14A r.w.r.8D (2) (ii) (iii) of the Income Tax Rules, 1962 (Rules). During the assessment proceedings the AO found that assessee had earned exempt income, comprising of dividend income, Rs.31.15 lakhs,that it had on its own disallowed 10% (Rs.3.11 lakhs) of the dividend income as expenses incurred for earning exempt income. However, the AO was not convinced about the disallowance to be made.Applying Rule 8D of the Rules, he computed the disallowance at Rs.65.60 lakhs. Allowing the suo-motu disallowance, he disallowed sum of Rs.62.48 lakhs.

3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA).Before him,it was argued that the interest expenditure was incurred in connection with the loan taken for giving margin money to the broker for F & O transactions and for purchasing trading stock, that other expenses were eligible to share trading, that no expenses were incurred for earning exempt income, that the share trading 4847/M/16-NinjaS(12-13) income and future and option transactions were taxable, that the disallowance could not exceed the exempt income of Rs.31.15 lakhs,that the income from share trading and future and option were not exempt from tax, that Rule 8D apply to investments,that same would not apply where the shares were held as stock in trade. After considering the submission of the assessee and the assessment order, the FAA held that in the cases of Damani Estates Finance Private Ltd (TS-330- ITD-2013) and DH Securities Private Ltd.(99 DTR 298) the Tribunal had held that disallowance u/s.14 A could be made even if shares were held as stock in trade.

4.During the course of hearing before us,the Authorised Representative (AR) relied upon the cases of HDFC Bank Ltd (383 ITR 529), India Advantages Securities Ltd (380 ITR 471), Max India Ltd (290 CTR 76). The Departmental Representative (DR) left the issue to the discretion of the Bench.

5.After hearing the rival submissions,we find that the only issue to be decided is as to whether the expenditure eligible to stock in trade can be disallowed invoking the provisions of section 14 A r.w.r.8D of the Rules. We find that in the cases relied upon by the AR,it has been clearly held that no disallowance u/s.14A r.w.r 8D of the Rules,can be made for the securities held as stock in trade.The reason behind it is not difficult to understand.Income arising from the business of an assessee is taxed under the head business and profession.So,all the expenses have to be considered while computing the business income.On the other hand,if the securities are held as investment and an assessee earns exempt income,same can be subjected to disallowance as envisaged by the provisions of section 14A.In the case under consideration the assessee is dealing in shares and F &O segments and offering its income under the head business income.Therefore,in our opinion,the FAA was not justified in confirming the disallowance made for expenses incurred with regard to stock in trade. Reversing his order,we decide the effective ground of appeal in favour of the assessee. As a result,appeal filed by the assessee stands allowed. फलतः िनधा"रती "ारा दािखल क" गई अपील मंजूर क" जाती है. Order pronounced in the open court on 07th March, 2017. आदेश क" घोषणा खुले "यायालय म" "दनांक 07 माच" , 2017 को क" गई । (राम लाल नेगी राम लाल नेगी / Ram Lal Negi) (राजे"" / Rajendra) राम लाल नेगी राम लाल नेगी "याियक सद"य / JUDICIAL MEMBER लेखा लेखा सद"य सद"य / ACCOUNTANT MEMBER लेखा लेखा सद"य सद"य मुंबई Mumbai; "दनांक/Dated : 07.03 .2017. Jv.Sr.PS. 2 4847/M/16-NinjaS(12-13)