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TMI Blog2013 (3) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance under rule 8D, the CIT(A) has upheld disallowance to the extent of ₹ 1,57,227 in respect of indirect expenses attributed to the earning of dividends, and it has even the case of revenue that this disallowance for indirect expenses is unfair or unreasonable - confirm the conclusions of CIT(A) and decline to interfere in the matter. - IT Appeal No. 666 (Kol.) of 2012 - - - Dated:- 11-3-2013 - Pramod Kumar and Mahavir Singh, JJ. For the Appellant L.K.S. Dahiya and K.N. Jana. For the Respondent Girish Sharma. ORDER:- Pramod Kumar, Accountant Member - By way of this appeal, the Assessing Officer has challenged correctness of learned Commissioner (Appeals)'s order dated 21st January 2011, in the matter of assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for the assessment year 2008-09, on the following ground: 1.That on the facts and circumstances of the case, learned CIT(A) erred in law in holding that the disallowance under section 14 A of the Income Tax Act, read with rule 8D of the Income Tax Rules, is not applicable in the case of the assessee since the shares were kept as stock in trade. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come without any kind of expenses or labour howsoever, small it may be. Therefore, the Assessing Officer was justified in calculating the disallowance on the exempted income. During the appellate proceedings the appellant was asked to file the details of share dividend earned and calculation of loss disallowable as per the provisions of section 94(7). The appellant submitted the details of all the shares and has calculated an amount of Rs. 1,57,227/- to be disallowable as loss against the dividend income under provisions to section 94(7) of the I.T. Act, 1961. The assessee does not have any investments and all the shares are being held as stock in trade only. Therefore, the assessee submitted that no deduction can be made on account of expenses. Following the judgments of Hon'ble Kerala High Court iln CIT v. - Leena Ramchanddran (Kerala High Court) - ITA No. 1784 of 2009 and Hon'ble ITAT, Mumbai ln the case of Yatish Trading Co. P. Ltd. v. ACIT (ITAT Mumbai)- ITA No. 456/Mum./2009 (10.11.2010) relied upon by the assessee in the written submissions, it is held that Rule 8D is not applicable in the case of assessee since there are no investments and all the shares were kept as stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectly relating to income which does not form part of total income; (ii) in a case where the assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt, an amount computed in accordance with the following formula, namely:- A x B C Where A = amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the previous year; B = the average of value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year; C = the average of total assets as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year; (iii) an amount equal to one-half per cent of the average of the value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year." 3.3 For the purposes of this rule, the 'total assets' shall mean, total assets as appearing in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d duty bound to determine the expenditure which has been incurred in relation to income which does not form part of total income under the Act", but further added, while remitting the matter to the Assessing Officer for computation of disallowance under section 14 A, that the Assessing Officer shall examine whether "any expenditure (direct or indirect)" [Emphasis by underlining supplied by us] in relation to exempt income is incurred and that disallow the same. As a corollary to the above legal position, so far as disallowance under section 14 A in a situation in which the exempt income yielding asset, such as shares in question, is held as stock in trade, and not as investment, the disallowance will be of related direct and indirect expenditure, whereas disallowance under rule 8 D will be restricted to disallowance of only direct expenses. Revenue thus derives no advantage from invoking rule 8 D in such cases; on the contrary, the scope of disallowance is only minimised in such a situation. 9. So far as the case before us is concerned, as will be clearly discernible from the observations of the learned CIT(A) extracted earlier in this order, learned CIT(A) has upheld disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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