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2015 (8) TMI 1 - AT - Income TaxDisallowance of expenses relatable to exempt income by invoking the provisions of section 14A of the Act read with Rule 8D - CIT(A) deleted the addition - Held that - The provisions of section 14A read with Rule 8D of the Rules will not apply to the shares held as stock in trade. Keeping in view the decision of Hon ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. (1973 (1) TMI 1 - SUPREME Court ) and as the Hon ble Karnataka High Court in the case of M/s. CCI Ltd. Vs. JCIT 2012 (4) TMI 282 - KARNATAKA HIGH COURT and Hon ble Kerala High Court in the case of CIT Vs. Leena Ramachandran (2010 (6) TMI 612 - Kerala High Court ), are in favour of the assessee, we decide this issue in favour of the assessee and against the revenue Rebate u/s. 88E - Whether CIT(A) erred in allowing rebate u/s. 88E even though the income is assessed u/s. 115JB? - Held that - The issue is now settled in favour of assessee that rebate u/s. 88E of the Act will be allowed even though the income is to be assessed u/s. 115JB of the Act. See Commissioner of Income-tax Versus Horizon Capital Ltd. 2011 (10) TMI 489 - KARNATAKA HIGH COURT - Decided against revenue.
Issues Involved:
1. Disallowance of expenses relatable to exempt income under section 14A of the Income-tax Act, 1961. 2. Allowing rebate under section 88E of the Act even when income is assessed under section 115JB of the Act. Issue 1: Disallowance of expenses relatable to exempt income under section 14A: The appeal by revenue challenged the order of CIT(A) deleting the addition made by AO on account of disallowance of expenses relatable to exempt income under section 14A of the Act. The revenue contended that the CIT(A) erred in law in deleting the addition to the extent of a specific amount. The appellant argued that the disallowance of expenses for earning dividend income was not justified. The appellant cited decisions from the Hon'ble Kerala High Court and Hon'ble Karnataka High Court to support their argument that no expenditure could be deducted from dividend income if no expenditure was incurred in earning it. The Hon'ble Delhi High Court held a contrary view. However, the tribunal decided in favor of the assessee, following the decisions of the Hon'ble Supreme Court, Hon'ble Karnataka High Court, and Hon'ble Kerala High Court, stating that section 14A does not apply to shares held as stock in trade. Issue 2: Allowing rebate under section 88E against MAT under section 115JB: The second issue in the appeal of revenue concerned the allowance of rebate under section 88E of the Act even though the income was assessed under section 115JB of the Act. The revenue contended that the CIT(A) erred in allowing the rebate against Minimum Alternate Tax (MAT). The tribunal noted that even when income is computed under section 115JB, rebate under section 88E is to be allowed while computing the tax. The tribunal relied on the decision of the Hon'ble Karnataka High Court in the case of CIT Vs. M/s. Horizon Capital Ltd. and other similar judgments to support the allowance of rebate under section 88E despite the income being assessed under section 115JB. The tribunal upheld the order of CIT(A) on this issue, stating that the rebate under section 88E should be allowed as per legislative intent, and hence, dismissed the appeal of the revenue. In conclusion, the tribunal dismissed the appeal of the revenue, upholding the order of CIT(A) on both issues. The judgment provided detailed analysis and references to legal precedents to support the decisions made on the disallowance of expenses relatable to exempt income under section 14A and the allowance of rebate under section 88E despite the income being assessed under section 115JB of the Act.
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