2017 (4) TMI 1516 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - assessee is a trader in shares and held the shares and stocks as stock in trade - HELD THAT - We find that the issue is squarely covered in favour of the assessee in the case of India Advantage Securities Ltd. 2015 (6) TMI 140 - BOMBAY HIGH COURT and in assessee s own case by the order of Tribunal in earlier years wherein held entire funds of the assessee except small amount pertaining to the partner capital balance are interest bearing funds. Even a lay man on perusal of the financial statement of the assessee firm can decide the issue in the favour of revenue that interest bearing funds were utilized for purchase in shares. Therefore that the contention of the assessee that interest bearing fund were not used for purchase in shares is not correct Respectively following the same we delete the disallowance and allowed the claim of the assessee. - Decided in favour of assessee.

Summary

Issues:
Disallowance of expenses relatable to exempted income under section 14A read with Rule 8D despite being a trader in shares and holding shares as stock in trade.

Analysis:
The appeal was against the order of CIT(A) confirming the AO's disallowance of expenses relatable to exempted income under section 14A read with Rule 8D. The AO contended that interest expenses of ?45,84,77,832 were paid by the assessee who was trading in shares and held shares as stock in trade. The assessee argued that the funds used were interest-bearing for share purchase. The Counsel referred to a similar case decided by the Hon'ble Bombay High Court and a Tribunal decision in favor of the assessee in earlier years. The Tribunal noted that the issue was covered in favor of the assessee by the High Court decision and previous Tribunal orders, thus deleting the disallowance and allowing the claim of the assessee.

The Tribunal found that the issue was squarely covered in favor of the assessee by the decision of the Hon'ble Bombay High Court in a similar case and previous Tribunal decisions in favor of the assessee. The Tribunal, after hearing both sides and considering the facts, deleted the disallowance and allowed the claim of the assessee. The Senior DR agreed that the issue was in favor of the assessee but relied on lower authorities' orders. The Tribunal, following the precedent set by the High Court and previous Tribunal decisions, allowed the appeal of the assessee, pronouncing the order in open court on 19-04-2017.