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TMI Blog2013 (10) TMI 546X X X X Extracts X X X X X X X X Extracts X X X X ..... crutiny assessment proceedings, the Assessing Officer observed that the assessee has received dividend income of Rs. 79.20,978/- which is claimed as exempt u/s. 10(34) of the Act. The AO further noticed that the assessee has allocated an amount of Rs. 1,27,355/- only in earning the dividend income. The AO sought explanation from the assessee as to why expenditure incurred earning the dividend income should not be disallowed u/s. 14A r.w. Rule 8D. 4.1. In response, the assessee filed a detailed reply dt. 23.10.2009 and submitted that assessee has already disallowed a sum of Rs. 1,27,355/- in the computation of income therefore, no further expenditure needs to be disallowed. Interest debited to profit and loss account relates to banks for trading in debt securities. The assessee further explained that bank facilities were allowed to be taken only against debt securities and can only be utilized against purchase of debt securities. The assessee further submitted that even if Rule 8D is invoked, total disallowance come to Rs. 8,44,098/- out of which an amount of Rs. 1,27,355/- has already been disallowed and accordingly prayed to the AO that any disallowance if made should be restrict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. So far as first grievance is concerned, it is now well settled that provisions of TDS are not applicable so far as VSAT and Leaseline charges paid to Mumbai Stock Exchange are concerned as held by Hon'ble Jurisdictional High Court in the case of CIT Vs M/s. Stock and Bond Trading Co. in ITA No. 4117 of 2010 and so far as transaction charges are concerned, the Hon'ble Jurisdictional High Court in the case of Kotak Securities Ltd 340 ITR 333 has held that liability of TDS exists u/s. 194J in respect of transaction charges only. (i) that the assessee was liable to deduct tax at source before crediting the transaction charges to the account of the stock exchange. (ii) That though section 194J was inserted with effect from July 1, 1995, till the assessment year in question that is assessment year 2005-06 both the Revenue and the assessee proceeded on the footing that section 194J was not applicable to the payment of transaction charges and accordingly, during the period from 1995 to 2005 neither had the assessee deducted tax at source while crediting the transaction charges to the account of the stock exchange nor had the Revenue raised any objection or initiated any proceedings for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture need to be disallowed u/s. 14A of the Act. The assessee further explained that the interest expenditure debited in the Profit and loss account relates to interest paid to banks for trading in debt securities. 17.1. The assessee strongly submitted that the bank facilities were allowed to be taken only against debt securities and can only be utilized against purchase of debt securities. The assessee further explained that for the year under consideration, it has earned interest income on such debt securities amounting to Rs. 7,47,26,425/- and has also earned profit on purchase and sale of debt securities at Rs. 9,51,45,792/- in effect there is a profit of Rs. 3,44,35,470/- in debt securities after considering interest expenditure. Thereafter the assessee gave the working of the disallowance as per Rule 8D and computed the disallowance at Rs. 39,19,175/-. It was explained that since assessee has already disallowed a sum of Rs. 1,75,883/- if at all any disallowance is to be made, the same should be at Rs. 37,43,292/- only. The working of the assessee was not accepted by the AO who went on to compute the disallowance by invoking the provisions of Sec. 14A r.w. Rule 8D and computed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufficient own funds to cover up the investments. The Hon'ble Jurisdictional High Court in the case of CIT Vs Reliance Utilities & Power ltd., 313 ITR 340 has held that where both own funds and loan funds are available with the assessee, the presumption is that the investment is made out of own funds. Respectfully following the decision of the Hon'ble Jurisdictional High Court, in our considerate view, the disallowance as computed by the assessee under Rule 8D at Rs. 39,19,175/- should meet the ends of justice. We, accordingly direct the AO to recomputed the disallowance as done by the assessee after giving a rebate of Rs. 1,75,883/- which has already been disallowed by the assessee in its computation of income. 23. In the result, the appeal filed by the Revenue is partly allowed. ITA No. 456/M/2012 - Assessee's appeal 24. The first ground relates to disallowance of mark to mark loss on derivatives of Rs. 5,96,510/- holding the loss as "notional loss". 25. This issue has been decided in favour of the assessee by various judicial pronouncements such as Edelweiss Capital Ltd in ITA No. 5324/M/07, Kotak Mahindra Investment ltd in ITA No. 1502/M/2012 and M/s. Urudavan Investment & T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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