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Issues involved: Appeal against order of CIT(A) deleting addition made by AO under section 14A of the Income Tax Act, 1961 and against order of CIT(A) allowing credit of STT under section 88E of the Act.
Issue 1: Addition under section 14A The appeal by revenue challenged the deletion of addition made by AO under section 14A of the Act. The assessee, engaged in share dealing business, earned exempt dividend income. The AO disallowed expenses under section 14A applying Rule 8D. The CIT(A) allowed deduction of interest under section 36(1)(iii) based on Kerala High Court decision. The Tribunal noted that AO did not attribute any expenditure to dividend income and did not record any satisfaction about incorrectness of expenditure claim. Therefore, the Tribunal confirmed CIT(A)'s decision to delete the addition, as no disallowance could be made without proper findings. The issue was dismissed in favor of the assessee. Issue 2: Credit of STT under section 88E The revenue appealed against CIT(A)'s decision to allow credit of STT under section 88E. The AO found no computation of MAT as per section 115JB in the return of income. The CIT(A) held that book profit from share trading was eligible for STT credit. Citing a Bangalore Bench decision, the Tribunal explained that the rebate of STT is allowable from income tax computed under section 115JB, irrespective of regular provisions or deeming provision. As the assessee's total income included income from taxable Securities Transactions, the Tribunal allowed the claim for STT rebate. Following the precedent, the Tribunal dismissed this ground of revenue's appeal. In conclusion, the Tribunal dismissed the appeal of the revenue, upholding the decisions of the CIT(A) regarding both issues.
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