AMIDEEP INVESTMENTS CONSULTANTS,MUMBAI vs. DCIT RG 4(1), MUMBAI
In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that Section 14A read with Rule 8D is not applicable to dividend income earned from shares held as stock-in-trade in the ordinary course of business. The disallowance made by the AO was set aside.
What were the facts?
The assessee, a stock broker, earned exempt dividend income from shares held as stock-in-trade. The Assessing Officer disallowed expenses under Section 14A read with Rule 8D, which was upheld by the CIT(A).
What were the issues?
Whether expenses attributable to earning dividend income from shares held as stock-in-trade are disallowable under Section 14A read with Rule 8D.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: HON’BLE S/SHRI JOGINDER SINGH (JM), & RAJESH KUMAR,(AM)
स्थधमी रेखध सं./जीआइआय सं./PAN/TAN No. :AAAFA6971A अऩीरधथी ओय से / Appellant by: Shri Hardik Mistry प्रत्मथी की ओय से/Respondent by Shri A Ramchandran सुनवधई की तधयीख / Date of Hearing : 26.7.2016 घोषणध की तधयीख /Date of Pronouncement : 29.7.2016 आदेश / O R D E R
Per RAJESH KUMAR, Accountant Member:
This is an appeal filed by the assessee and is directed against the order of the Ld. CIT(A)-9, Mumbai dt.15.12.2014 pertaining to A.Y. 2010-11.
The only ground raised
by the assessee in the grounds of appeal is against the confirmation of disallowance of Rs.4,94,019/- u/s 14A by the ld. CIT(A) as made by the AO u/s 14A read with rule 8D of the Income Tax Rules 1962.
3. The facts in brief are that the assessee has filed e-return of income on 27.9.2010 declaring total income of Rs.93,76,548/- which was processed under section 143(1) of the Act. The case of the assessee was selected for scrutiny and statutory notices under section 143(2) and 142(1) were issued and served upon the assessee.
4. The assessee was a registered stock broker and Member of the National Stock Exchange in Capital Market and Future and Option Segment and engaged in the business of equity share broking, trading and dealing in shares and securities. During the course of assessment proceedings, the AO found that the assessee has earned exempt income by way of dividend amounting to Rs.3,10,877/- which was claimed exempt under section 10(34) of the Act without disallowing the expenses which were attributable to earning of exempt as per section u/s 14A r.w.rule 8D. Accordingly, the AO issued show cause notice to the assessee to explain as to why the provision of section 14A r.w. rule 8D should not be invoked by considering the stock-in-stock of shares and securities. The AO not convinced by the explanation given by the assessee invoked the provisions of section 14A read with rule 8D of the Rules and worked out the disallowance at Rs.4,94,019/-, calculation whereof is given at page 7 of the Assessment order. Aggrieved by the decision of the AO, the assessee preferred an appeal before the ld.CIT(A), who, in turn, dismissed the appeal of the assessee after considering the submissions as produced in para 2.2 of the appellate order as under by observing and holding as under: “2.2 I have carefully considered the facts of the case, assessment order passed by the AO and the submission made by the appellant. From a reading of Rule 8D, it is very much clear that wherever there is be allocated for the purpose of calculation of expenditure u/ s. 14A. This rule provides for a reliable basis for Computing the disallowance. The Hon'ble Bombay High Court in recent judgment in the case of Godrej & Boyce Mfg. Co. Ltd. (G & B) Vs. DCIT vide of 2010 & WP no. 758 of 2010, dtd. 12.08.2010 has also upheld the applicability of Rule 8D for the purpose of calculating disallowance u/s. 14A w.e.f. AY. 2008-09. In view of this, the disallowance made by the AO is upheld. Hence appeal on this ground is treated as dismissed”.
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