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TMI Blog2017 (6) TMI 914X X X X Extracts X X X X X X X X Extracts X X X X ..... e nature of expenditure debited to the profit & loss account as well as the stocks of shares recorded in the books of account, i.e., whether it is held as stock-in-trade or as investment or as both. When the assessee has demonstrated that the interest bearing funds have been utilized for giving loans and advances on which huge interest income has been earned, then prima facie there could not be any case of disallowance of interest. Similarly with regard to the working of indirect expenditure there are various aspects which needs to be examined to like nature of expenses debited, working of average value of investment, if rule 8D at all is held to be applicable. None of these fact and assessee’s nature of accounts have been examined by AO or CIT (A) as per law enshrined in section 14(2). Accordingly, the whole matter regarding disallowance u/s 14A should be restored back to the file of the Assessing Officer to re-examine the claim. Appeal of the assessee is allowed for statistical purposes. - ITA No. 2008/Del./2014 - - - Dated:- 18-4-2017 - SHRI N.K. SAINI, ACCOUNTANT MEMBER, AND SHRI AMIT SHUKLA, JUDICIAL MEMBER For The Assessee : Sh. Rajesh Dureja, Advocate for The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s), the assessee pointed that the Assessing Officer never raised any query or asked for any detail regarding dividend stripping by the assessee company on any such transaction. When no query was raised by Assessing Officer then there is no question of furnishing details before the Assessing Officer. In support, of this contention, various questionnaires as issued by the Assessing Officer was also furnished. It was further submitted that, before making any disallowance u/s 94(7), the Assessing Officer did not bring on record any material which could prove that the assessee was indulged in dividend stripping. From the details of trade of shares of GHCL, the assessee pointed out that it was having 1,40,06,596 shares at the beginning of the relevant assessment year, i.e., as on 1.4.2008 as it was holding considerable shares from the A.Y. 2006-07 itself. During the year consideration it only purchased 5,88,864 shares of GHCL and sold only 16,15,417. At the end of the relevant assessment year, i.e., on 31.3.2009, the assessee company was having 1,29,22,046 shares of GHCL, hence whatever shares have been sold were held from earlier years and therefore, the provisions of section 94(7) cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a simplistic way for making the addition or disallowing the loss cannot be upheld, because before invoking the section 94(7), three conditions have been laid down which are as under:- a. Any person buys or acquires any security or unit within a period of three months prior to record date; b. i) Such person sells or transfer such securities within a period of three months after such date; or ii) Transfers such units within a period of 9 months after such record date; c. The dividend or income on such securities or unit received or receivable by such person is exempted, If the aforesaid conditions are fulfilled, then only the loss arising on account of purchase and sale of particular security shall be ignored for the purpose of computing the income chargeable to tax, that is, the loss shall be disallowed. Here in this case as pointed out by the ld. counsel that, there were huge opening balances of shares of GHCL coming from earlier years which were more than 1.40 crore shares and during the year assessee has purchased only 5,65,864 shares. As against such huge holding of GHCL shares, only 16,50,414 of these shares were sold. Thus, prima facie it cannot be reckoned that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llate order from pages 4 to 10. However, the Learned CIT (Appeals) confirmed the said disallowance in a very detail manner, however all his findings and observations are based on conceptual and theoretical aspect of provision of section 14A and why rule 8D is mandatory. 10. Before us, the ld. counsel submitted that, assessee during the course of the assessment proceedings had given from the detailed objection/reply as to why the disallowance u/s 14A cannot be made on the facts of the assessee s case. The assessee has given the entire details of shares held as inventory and shares held as investment and also the amount due to secured loan creditors and sundry creditors. Apart from that the assessee also had given the utilisation of interest bearing funds and also the why no interest disallowance can be made. The assessee s submissions and details have not been properly appreciated and both the authorities have proceeded with the disallowance under rule 8D without assigning any reasons as to why the assessee s claim is not correct unsustainable in law or on facts. 11. On the other hand ld. DR strongly relied upon the order of Learned CIT (Appeals) and submitted he has given det ..... X X X X Extracts X X X X X X X X Extracts X X X X
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