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TMI Blog2016 (10) TMI 698X X X X Extracts X X X X X X X X Extracts X X X X ..... m Private Limited vs. ACIT [2015 (11) TMI 110 - ITAT AHMEDABAD ] has similarly held that Rule 8D will have no application when the shares are held as stock-in-trade - Decide in favour of assessee - I.T.A. No.2932/Ahd/2013 - - - Dated:- 31-8-2016 - SHRI RAJPAL YADAV, JUDICIAL MEMBER And SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER For The Appellant : Shri James Kurian, Sr.DR For The Respondent : Shri S.N. Divatia, AR ORDER PER SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER : This appeal by the Revenue is directed against the order of the Commissioner of Income Tax(Appeals)-VIII, Ahmedabad dated 02/09/2013 for the Assessment Year (AY) 2009-10. 2. The relevant facts as culled out from the materials on record are as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was therefore show-caused and asked as to why the disallowance of expenses should not be made u/s.14A of the Act to which assessee inter-alia submitted that he is in the business of shares and securities and dividend income is incidental to the business and therefore provisions of section 14A of the Act does not apply. The submission of the assessee was not found acceptable to the AO. He thereafter, following the method prescribed under Rule 8D r.w.s.14A of the Act worked out the disallowance of expenses at ₹ 75,10,403/-. Aggrieved by the order of AO, assessee carried the matter before the ld.CIT(A) who decided the issue by holding as under:- 3.3 Decision : I have carefully considered the facts of the case, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion that the disallowance under section 14A is not warranted in the case of the appellant as he has shown the income from trading of shares as a business income and the shares have been shown as the closing stock. The appellant has rightly relied on the judgement of Karnataka High Court in the case of CCI Ltd 20 taxman.com 196 wherein it has been held that for the assessee who was a dealer in shares and securities and he had not retained shares with intention of earning dividend and dividend income was incidental to his business of sale of shares which remained unsold by the assessee the disallowance under section 14 A should not be made. The decision has further been followed by the judicial Bench of Ahmedabad ITAT in the case of Ethio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure u/s.14A of the Act. It is an undisputed fact that the assessee is doing business of trading in shares and the shares at the end of the year are shown as stock-in-trade and the income from trading of shares has been shown as business income by the assessee. We find that the ld.CIT(A), after relying on the decision of Hon ble Karnataka High Court in the case of CCI Ltd. 20 taxmann.com 196, has noted that where the dividend income was incidental to the business of sales of shares, no disallowance u/s.14A could be made. We further find that Coordinate Bench in the case of Anjalee Exim Private Limited vs. ACIT has similarly held that Rule 8D will have no application when the shares are held as stock-in-trade. The relevant findings of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely:- (i) the amount of expenditure directly 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rule 8 D(ii) and (iii), no disallowance can be made under rule 8D (2)(ii) and (iii) either. As held by Hon'ble Supreme Court in the case of CIT v. B C Srinivasa Setty [1981] 128 ITR 294, when computation provisions fail, the charging provisions cannot be applied, and by the same logic, when the computation provisions under rule 8 D (2) (ii) and (iii) fail, disallowance under the said provisions cannot be made either as the said provision is rendered unworkable. 5. In view of the above discussions, the plea of the assessee indeed deserves to be upheld. We do so, and having noted that there are admittedly no direction expenses incurred in earning the dividends which could qualify for being covered by rule 8D2(i), we delete the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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