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2020 (4) TMI 255 - ITAT MUMBAICorrect head of income - Income from purchase of shares - LTCG OR business income - Whether the purchase of shares are shown under the head stock-in-trade or under the head investments? - HELD THAT:- Since the department has not pointed out any material change in the facts of the present case, we have no reason to take a different view. Hence, respectfully following the decision of the coordinate Bench rendered in assessee’s own case for the assessment year 2006-07 [2014 (1) TMI 1599 - ITAT MUMBAI] set aside the findings of the Ld. CIT(A) and allow this ground of appeal of the assessee. Accordingly, we direct the AO to treat the income of the assessee amounting to ₹ 74,05,599/- under the head income from short term capital gains. Disallowance u/s 14A read with rule 8D - assessee earned exempt income and not made any suo moto disallowance stating that it had not incurred any expenditure in relation to the earning of the said exempt income - HELD THAT:- We notice that the Ld. CIT (A) has confirmed the disallowance amounting to ₹ 9,74,375/- computed by the AO against the exempt income of ₹ 4,21,042/-, which is contrary to the ratio laid down by the Hon’ble Delhi High Court in the case of Joint Investments 2015 (3) TMI 155 - DELHI HIGH COURT as the disallowance confirmed by the Ld. CIT (A) is more than the exempt income earned by the assessee. The Hon’ble Delhi High Court in the case of Joint Investments vs. CIT, has held that section 14A and Rule 8D cannot be interpreted to mean that the entire tax exempt income can be disallowed. In the present case, the assessee has earned exempt income of ₹ 4,21,042/- on which the AO made disallowance of ₹ 9,74,375/-. In view of the ratio laid down by the Hon’ble Delhi High Court in the aforesaid case, the disallowance u/s 14A cannot exceed exempt income of the relevant year. Findings of the Ld.CIT (A) are contrary to the law laid down by the Hon’ble Delhi High Court. Hence, following the ratio laid down by the Hon’ble Delhi High Court in the aforesaid case, we set aside the findings of the Ld. CIT (A) and direct the AO to restrict the disallowance to the exempt income earned by the assessee during the relevant year.
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