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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 ..... ₹ 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 the assessee is sale and purchase of shares, all the interest has been paid in relation to normal business income, and cannot be allocated for the purpose of disallowance u/s. 14A read with Rule 8D. Find considerable cogency in the contention of the Ld. Counsel of the assessee that it is a settled law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,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 ₹ 34,76,550/-. Subsequently, the Ld. CIT, Delhi-XI, New Delhi vide his order dated 7.3.2013 after examining the facts of the case observed that the order dated 3.12.2010 of the AO is erroneous and prejudicial to the interest of revenue and set aside the same for making afresh assessment. Consequent to the order passed by the Ld. CIT, the AO passed a fresh assessment u/s. 143(3)/263 of the Act on 27.3.2014, assessing the income of the assessee at ₹ 44,26,610/-, after making an addition of ₹ 10,74, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (India) Ltd. vs. ITO in ITA No. 2663-2665/Mum/2015 dated 28.10.2015) 7. On the contrary, Ld. DR opposed the aforesaid contention of the Ld. Counsel of the assessee and relied upon the orders of the authorities below and requested that the same may be upheld. 8. I have heard both the parties and perused the relevant records available with me, especially the orders passed by the revenue authorities and the case laws cited by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 the assessee is sale and purchase of shares, all the interest has been paid in relation to normal business income, and cannot be allocated for the purpose of disallowance u/s. 14A read with Rule 8D. I find considerable cogency in the contention of the Ld. Counsel of the assessee that it is a settled law that the disallowance u/s. 14A read with Rule 8D should only be made with regard to investments and not with the reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 it resulted in some dividend income on the shares purchased for trading, then the same would not change the purpose, nature or character of the expenditure. Thus, when the said expenditure (interest) was incurred for trading activity then the same could not be said to have been incurred for earning the dividend income. As per the basic principle of taxation only the net income, i.e., gross income minus expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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] 159 ITD 554 (Mumbai - Trib.), has held as under: The issue for adjudication is as to whether the shares held by the assessee-company under the head 'stock-in-trade' are to be considered for making disallowance under section 14A, read with rule 8D. The Jurisdictional Court in the case of CIT v. India Advantage Securities Ltd. IT Appeal No. 1131 of 2013 dated 17- 3-2015 has held that disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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