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TMI Blog2016 (10) TMI 988X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 2. That the Ld. CIT(A) erred in sustaining the disallowance u/s. 14A r.w.r. 8D amounting to Rs. 10,74,056/- (Rs. 11,24,056/- = Rs. 50,000/-) 3. That the Ld. CIT(A) erred in sustaining the interest charged u/s. 234A, 234B, 234C & 234D of the Income Tax Act. ITA NO.6091/DEL/2015 3. The brief facts of the case are that assessee is an individual engaged in the business of sale and purchase of shares and mutual funds. He filed his return of income of Rs. 33,51,550/- on 30.9.2008 and processed u/s. 143(1) of the I.T. Act, 1961 on same income. Notice u/s. 143(2) of the I.T. Act, 1961 was issued on 8.9.2009 and assessment u/s. 143(3) was completed on 3.12.2010 on the assessed income of Rs. 34,76,550/-. Subsequently, the Ld. CIT, Delhi-XI, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assesse is in the business of sale and purchase of shares and mutual funds. The shares were held as stock in trade, therefore, provisions of section 14A read with Rule 8D are not applicable. In order to support his contention he relied upon the following case laws:- - ITAT, Delhi Bench decision in the case of Vidyut Investment Ltd. vs. ITO (2006) 10 SOT 284 (Delhi). - ITAT, Mumbai decision in the case of Yatish Trading Co. (P) Ltd. vs. ACIT (2011) 129 ITD 237 (Mumbai). - ITAT, Mumbai in the case of Fiduciary Shares & Stock (P) Ltd. vs. ACIT (2016) 159 ITD 554 (Mumbai) - Dy. DIT (OSD) vs. Shree Durga Capital Ltd., Mumbai ITA No. 7405/Mum/2011 dated 3.8.2015 - ITAT, Mumbai - ITAT, Mumbai in the case of Devkant Synthetics ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable in case of stock-in-trade. I find that during the year under consideration, assessee had a long term capital gain of Rs. 54,74,924/- alongwith dividend income on mutual funds and shares for Rs. 46,55,903. I further note that the assessee has incurred bank charges and interest expense amounting to Rs. 19,42,045.95 during the year under consideration, complete details were filed by the assessee before the AO as well as Ld. CIT(A) and no loan has been taken by the assessee during the year as is evident from the balance sheet of the assessee. The said interest has been paid by the assessee to the financiers who have funded the IPOs as is evident from the records, and there is no dividend income from transaction. Since the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of section 14A could not be invoked to hold that the expenses by way of interest and depository/custodial charges were incurred in relation to dividend income which did not form part of the total income. [Para 2.5]' b) ITAT, Mumbai in the case of Yatish Trading Co. (P.) Ltd. v. ACIT [2011] 129 ITD 237 (Mumbai), has held as under: "It is pertinent to note that the interest on borrowed funds used for trading activity is an allowable expenditure under section 36(1)(iii) and the same cannot be treated as an expenditure for earning the dividend income which is incidental to the trading activity. [Para 34] Thus, undisputedly, when the real purpose and intent to use the borrowed funds was for trading activity and if incidentally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance can be made under section 14A merely because some tax exempt income is received incidentally. In case of a dealer in shares and securities the primary object and intention for acquisition of the shares is to earn profit on trading of shares. The income on sale and purchase of the shares of a dealer is chargeable to tax. Therefore, if the said activity of purchase and sale also incidentally yields some dividend income on the shares held by him as. stock-in-trade such dividend income is not intended at the time of purchase of such shares and, accordingly, there is no live connection between the expenditure incurred and the dividend income. [Para 35]' c) ITAT Mumbai in the case of Fiduciary Shares & Stock (P.) Ltd. v. ACIT [2016] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 140 - BOMBAY HIGH COURT), the Hon'ble Bombay High Court has noticed that the CIT(A) took into account the words of the Rule and found that the figures as derived by the Assessing officer cannot be taken into consideration. The Ld CIT(A) had observed that, one can at best disallow the expenses which are incurred for earning dividend income and for that purpose, the figures under the head "Investment" could be taken and some charges apportioned for the purpose of computing expenses. Thus the disallowance of interest in relation to dividend received from shares held as stock-in-trade cannot be made. 8.1. In the background of the aforesaid discussions and respectfully following the precedents, as aforesaid, I delete the addition in disput ..... X X X X Extracts X X X X X X X X Extracts X X X X
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