9911796707
TMI Blog2012 (12) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the assessee during the year under consideration was engaged in the business of dealing in shares and securities both as investment and stock in trade for itself and also for its clients. In the return of income the assessee claimed Rs.12,39,128/- as rebate under sec. 88E(1) of the Income-tax Act, 1961. The assessee was asked to file the details of share trading income giving scrip-wise profit or loss. On verification of these details, it was seen that the assessee earned income on scrips which were not listed on the stock exchange or traded in securities before those were listed thereby implying that no STT was paid on such transactions. The assessee suffered losses on shares where STT was paid. To a query as to why STT rebate under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed rebate available under sec. 88E at Rs.12,39,128/- but the AO had disallowed entire STT payment of Rs.16,79,205/-. He further observed that the assessee should be entitled for 30% of effective STT payment i.e. 30% of Rs.15,68,537/- (Rs.16,79,205 - 1,10,668), which comes to Rs.4,70,561/-. The learned CIT(A) therefore, restricted the disallowance to the extent of Rs.4,70,561/- and allowed the relief of Rs.12,08,641/-. 3. The Revenue is aggrieved by restricting the disallowance to Rs.4,70,561/- as against Rs.16,79,205/-. On the other hand, the assessee has come in cross objection that rebate of Rs.12,39,128/- should be allowed under sec. 88E and not Rs.16,79,205/- which was the entire STT paid and not STT claimed under sec. 88E of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion", arising from taxable securities transactions, the assessee shall be entitled to a deduction, from the amount of Income-tax on such income arising from such transactions, computed in the manner provided in sub-sec. (2), of an equal amount to the securities transaction tax paid by him in respect of taxable securities transactions entered into in the course of his business during the previous year. First Proviso to sec. 88E(1) states that no deduction under sec. 88E(1) shall be allowed unless the assessee furnishes along with the return of income, evidence of payment of securities transactions tax in the prescribed form. Second Proviso to sec. 88E(1) provides that amount of deduction under this section shall not exceed the amount of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of Rs. 4,34,179/- and claimed the same to be exempt under sec. 10(34) of the Income-tax Act, 1961. The AO applied Rule 8D of the Income-tax Rules, 1962 and disallowed the amount of Rs.82,685/-. 7. Before CIT(A) it was submitted that dividend income of Rs.4,34,179/- was exempt from tax under sec. 10(34) of the Act. The assessee did not incur any expenditure to earn such dividend income. Yet the AO had invoked Rule 8D, which is not applicable for Assessment Year under consideration. He placed reliance on the decision of Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. vs. DCIT (2010) 328 ITR 81 and submitted that Rule 8D is not applicable for Assessment Year prior to Assessment Year 2008-09. The ld. CIT(A) on co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment Year 2007-08. However, the Court has held that the AO can make disallowance under sec. 14A if there is a direct nexus between the expenditure incurred and the exempt income. In the case before us, the AO has made disallowance under Rule 8D which is not applicable for the year under consideration. Ld. CIT(A) however, has disallowed 10% of exempt income. While arriving at this conclusion, ld. CIT(A) has not established any nexus between the exempt income and expenditure incurred. In the light of above discussion we are of the considered view that provisions of Rule 8D cannot be applied for the Assessment Year 2007-08 which is under consideration. Therefore, the AO was not justified in invoking the provisions of Rule 8D of the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
