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TMI Blog2019 (4) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... m of Rs. 17,65,795/- u/s. 14 A of the Act and Rs. 3 lacs by way of disallowance u/s. 80G. Further, the Ld. AO allowed the MAT of Rs. 2273025/- and disallowed a sum of Rs. 1098399 stating that it is the excess MAT credit, after excluding the surcharge and cess. 3. Assessee preferred the appeal before the Ld. CIT(A), which was dismissed by the Ld. CIT(A) by way of impugned order. Hence, the assessee is in appeal before us challenging the addition of Rs. 1765795/- and disallowance of MAT credit of Rs. 1098399/-. 4. It is the submission on behalf of the assessee that the assessee company is engaged in the business of trading in shares and these shares as part of its stock in trade and not an investment. It was further submitted that in its balance sheet also the assessee company has shown the shares as stock in trade and the the primary objective of investing in shares by the assessee company was to sell them at profit. It was further submitted that dividend income was only incidentally earned by the assessee company and Interest was paid by the assessee company on funds borrowed by it for acquiring its stock in trade and had no direct correlation with the divided income earned by it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred by way of interest on the money taken on loan for investment/purchase of shares cannot be segregated as the expenditure incurred exclusively for investment/purchase of shares. Actually, the expenditure has been incurred for having both the benefits. Thus, it is amply clear that the expenditure incurred by way of payment of interest has direct link with the dividend income and hence, disallowance as per section 14A of the I.T. Act. 8. Assessee placed reliance on the decision reported in the case of Vora Financial Services (P). Ltd. vs. ACIT, Mumbai by the ITAT, Mumbai Bench (2018) 96 taxmann.com 88 (Mum- Trib) wherein, it was held that where a major portion of dividend income had been received as shares held as stockin- trade, it cannot be appropriate to apply the provisions of Rule 8D. It is further argued by the Ld. Autherized Representative that whatever the expenses that are debited to the profit and loss account are the business expenses relating to trading of the shares and not additional expense whatsoever made. 9. Further reliance is placed on the decision of the Hon'ble Kerala High Court in the case of CIT vs. Smt. Leena Ramachandran (2010) 235 CTR 512 (Ker.) for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which shares were invested, or for the purpose of trading in the shares as business activity. 13. After considering the entire case law on this aspect in the light of the peculiar facts involved in both the matters, the Hon'ble Apex Court vide paragraph No. 39 and 40 held as follows:- 39) In those cases, where shares are held as stock-intrade, the main purpose is to trade in those shares and earn profits therefrom. However, we are not concerned with those profits which would naturally be treated as 'income' under the head 'profits and gains from business and profession'. What happens is that, in the process, when the shares are held as 'stock-in-trade', certain dividend is also earned, though incidentally, which is also an income. However, by virtue of Section 10 (34) of the Act, this dividend income is not to be included in the total income and is exempt from tax. This triggers the applicability of Section 14A of the Act which is based on the theory of apportionment of expenditure between taxable and non-taxable income as held in Walfort Share and Stock Brokers P Ltd. case. Therefore, to that extent, depending upon the facts of each case, the expenditure incurred in acquiring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be apportioned. Hon'ble Apex Court held that the tribunal and the Hon'ble High Court of Punjab and Haryana arrived at a correct conclusion by setting aside the disallowance under section 14 A of the Act in respect of the dividend earned on the shares held as stock in trade, because such shares were held during the business activity of the assessee and it is only by a quirk of fate that when the investee company declared dividend, those shares were held by the assessee, though the assessee has to ultimately trade those shares by selling them to earn profits. 15. Hon'ble Apex Court made a clear distinction of this case from the case of Maxopp investment Ltd were the assessee knew that whenever dividend would be declared by the investee company such dividend would necessarily be earned by the assessee and assessee alone, and it would be in the common knowledge of the assessee that such shares would generate dividend income as well as and when such dividend income is generated that would be earned by the assessee only. Hon'ble Apex Court in unequivocal terms held that in contrast, where the shares are held as stock in trade, this may not be necessarily a situation and the main pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DS etc. rank pari passu with the amount of MAT tax credit available u/s 115JAA. Secondly, the amount of tax payable for the year is determined after reducing the amount of advance tax, TDS and MAT credit. Thirdly, the resultant amount arrived at after making such deductions is the amount of tax, which the assessee is liable to pay. Fourthly, the amount of interest payable under any provision of this Act is calculated on the resultant amount. This shows that the amount of interest under the Act is liable to be paid on the amount of tax payable determined after deducting, inter alia, the amount of MAT tax credit. 9. We, therefore, hold that the amount of the MAT tax credit, 'inclusive of surcharge and education cess etc., if any, should be reduced from the amount of tax determined on the total income after adding surcharge and education cess, etc. Only the resultant amount payable will suffer interest under the relevant provisions of the Act. Since the amount of MAT tax credit is uncertain, we set aside the impugned order and remit the matter to the file of the Ld. AO for ascertaining the correct amount of MAT tax credit available with the assessee inclusive of surcharge and educa ..... 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