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TMI Blog2013 (11) TMI 1637X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal. Ground No. 1 relates to the disallowance made by the ACIT and confirmed by the Ld. CIT(A) u/s. 14A of the Act by applying Rule 8D of I.T. Rules, 1962. 3. The assessee is a trader in shares and securities. For the year under Consideration, the return was filed on 30.9.2008 declaring total income at ₹ 22,31,850/-. The case was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee. During the course of the scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has earned dividend income which it has claimed as exempt. The AO was of the firm belief that provisions of Sec. 14A r.w. Rule 8D are very much applicable in respect of its exempt income. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set, the Ld. Counsel for the assessee submitted that the issues involved are directly covered in favour of the assessee by the decision of the Tribunal, Mumbai Bench vide ITA No. 6711/M/2011. It is the say of the Counsel that in this case, the Tribunal has relied upon the decision of the Hon ble Karnataka High Court in the case of CCL Ltd Vs JCIT 250 CTR 291. The Ld. Counsel pleaded that the same should be followed in the case of the assessee. 6. Per contra, the Ld. Departmental Representative strongly supported the orders of the lower authorities. 7. We have carefully perused the orders of the lower authorities and the decision of the Tribunal in ITA No. 6711/M/11 vis- -vis facts of the case under consideration. We find force in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance could not be made in relation to the dividend received from trading shares. The Tribunal had however, distinguished the said judgment of Hon ble High Court of Kerala on the ground that in that case the acquisition of shares with the borrowed funds was for the purpose of controlling the company. Therefore, even though the purpose for acquiring the shares was business, the High Court had upheld the disallowance u/s.14A of the I.T. Act. The Tribunal also noted that the High Court in that case had only observed that the interest paid on borrowed funds utilised for acquiring shares could be allowed as deduction u/s.36(1)(iii) only if shares were held as stock-in-trade. These observations were only obiter dicta and not the ratio deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The order of the Tribunal was however, not upheld by the Tribunal. The High Court noted that 63% of shares which were purchased were sold and income derived was offered to tax as business income. The remaining 30% of shares which remained unsold had reverted to dividend income for which the assessee had not incurred any expenditure at all. The High Court also observed that the assessee had not retained the shares with the intention of earning dividend income which was incidental due to his sale of shares which remained unsold by the assessee. The High Court, therefore, did not uphold the order of the Tribunal disallowing the expenditure in relation to the dividend from shares. Thus there being a direct judgment of a Hon ble High Court on t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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