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TMI Blog2011 (8) TMI 1132X X X X Extracts X X X X X X X X Extracts X X X X ..... the Dividend has been earned on the Investment made on short term basis and there is hardly any element of expenses incurred in earning such income as once the application is made in various Funds, the allotment thereof follows and dividend thereafter required are in terms of time for depositing the dividend warrant into the bank and keeping records of such Investments from time to time. This may involve the salary of one person from the finance department who looks after such Investments. The assessee submitted that it would have no objection if some amount was being disallowed on the basis of expenditure directly related to the earning of such income. 5. The Assessing Officer disallowed a sum of Rs. 1,20,17,380/- under provisions of Sec. 14A r.w. Rule 8D of the Act on account of expenditure incurred on earning the exempted income. 6. Aggrieved, assessee preferred an appeal before the Ld. CIT(A). 7. The Ld. CIT(A) held as follows: "I have carefully considered the facts of the case. In the case under consideration the appellant earned dividend income of Rs. 2.83 crores which was claimed as exempt. Since this dividend income did not form part of total income therefore, provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the trading in shares. Thereafter, the Special bench, Delhi in case of Chiminvest Ltd, reported in (2009) 27 DTR (Del.)(SB)(Trib.)/82 also decided various issues in respect to applicability of section 14A. After insertion of Rule 8D it is mandatory to work out the disallowance u/s.14A as per formula provided in Rule 8D of the Rules. Though the AO calculated the disallowance as per formula, the appellant has argued that in the said formula the figure of "average of total assets" was incorrectly taken by AO at Rs. 162.50 crore as against the actual figure of Rs. 147.11 crore. The appellant argued that the AO committed such mistake since the AO reduced the figures of current liabilities. The AO is directed to verify the appellant's contention of "average of total asset" and re-work out the disallowance as per Rule 8D after taking into consideration appellant's submissions in this regard. This ground of appeal is dismissed." 8. Aggrieved, assessee is in appeal before us. We have heard both the parties and have carefully perused the material on record. 9. We heard both the parties. We find that in the case of National Stock Exchange the ITAT Mumbai Bench 'B' in ITA No. 9390/M/04 A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 14A to the book profit for the purpose of Sec. 115JB of the I.T. Act, 1061 which is wrong and contrary to the provisions of the I.T. Act, 1961 and the Rules made thereunder." 11. The AO had worked out the book profit under the provisions of Sec. 115JB of the Act. While doing so he added a sum of Rs. 1,20,17,380/- which represents the amount disallowed under the provisions of Sec. 14A r.w.Rule 8D of the Act . 12. The Ld. CIT(A) held as follows: "I have considered the facts of the case. As per Clause (f) of Explanation 1 to Sec. 115JB the book profit was required to be increased by the amount or amounts of expenditure relatable to income to which Sec. 10 applies. In the case under consideration, the AO correctly increased the book profit by the amount of expenditure relatable to exempt dividend income earned. Therefore the AO was justified in doing so as per provisions of Act. This ground of appeal is therefore dismissed." 13. Aggrieved, assessee is in appeal before us. 14. We heard both the parties. In the present case the AO has made an addition of Rs. 1,20,17,380/- on account of alleged expenditure incurred to earn exempt income while computing book profit u/s. 115JB of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eposits. The AO asked the assessee to explain as to why these interest receipts should not be treated as income from other sources. The assessee argued before the AO that the interest income was earned in the normal course of business and therefore chargeable to tax under the head income from business & profession. 18. The AO was not satisfied with the assessee's argument. The AO held that the assessee was not engaged in the money lending business. The interest was earned by way of parking surplus funds in the banks and with other (for share application money). There was nothing that the assessee produced to establish that the receipts were chargeable to tax under the head "Income from Business & Profession". In the facts and circumstances, the AO treated the interest income as income from other sources. 19. Before the Ld. CIT(A) it was submitted by the assessee as follows: "The appellant is an exchange which forms a platform for allowing legal trading in commodities. The Exchange was formed and governed by the rules of Govt. of India. The appellant had earned interest on Bank deposits and share application money amounting to Rs. 14,39,68,000/-. The said income was declared as B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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