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TMI Blog2014 (9) TMI 1215X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 14A of the Act is not called for. In this case also we find the ld. CIT(A) has held that when the shares were kept on trading account no disallowance us 14A of the Act is called for. We find that in such circumstances there is no infirmity in the order of ld. CIT(A) in view of the precedence as above. Furthermore the ld. CIT(A) has given a clear basis for the computation of disallowance confirmed by him. The Revenue has not been able to point out any infirmity in the same. Hence revenue s claim that the ld. CIT(A) should not have held that shares held as stock in trade do not attract disallowance u/s 14A of the Act is not sustainable. Accordingly in the background of the aforesaid discussion and precedent we uphold the order of ld.CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of ₹ 4,24,650/- under the head Penalty. The order oft eh CIT(A) should be set aside and the order of the Assessing Officer should be restored on this issue. 3. That the appellant craves for leave to add, delete or modify any of the grounds of appeal before or at the time of hearing." 3. Apropos : Disallowance u/s 14A of the Act : On this issue the AO observed that the assessee company derived dividend income of ₹ 12,37,120/-. AO computed the disallowance u/s 14A read with Rule 8D amounting to ₹ 41,69,459/-. 4. Upon assessee's appeal the ld. CIT(A) observed that the AO has considered the entire investment and inventories to consider disallowance u/s 14A of the Act. The ld. CIT(A) observed that the inventor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT(A) accordingly held as under :- "Thus, the disallowance u/s 14A is calculated as below :- Amount (Rs.) 1. Amount of expenditure directly relating to income which does not form part of total income (demat charges) 2,530/- 2. Interest paid during the year A 42,88,500/- Opening balance in investments of shares (as on 1.04.2007) 3,17,74,155/- Closing balance in investments of shares (as on 31.03.2008) 10,61,28,290/- Average of investments of shares B 6,89,51,223/- Average of total asssets (as per assessment order) C 46,79,18,452/- Interest to be disallowed A X B/C 6,31,942/- 3. An amount equal to one-half per cent of the average of the value investment 3,44,756/- Total Disallowance 9,79,228/- Hence, based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not retained shares with the intention of earning dividend income and the dividend income is incidental to its business of sale of shares, which remained unsold by the assessee, it cannot be said that the expenditure incurred in acquiring the shares has to be apportioned to the extent of dividend income and that should be disallowed from deductions. In that view of the matter, the approach of the authorities is not in conformity with the statutory provisions contained under the Act. Therefore, the impugned orders are not sustainable and require to be set aside." 5.1. From the above it clearly transpires that the Hon'ble High Court has held that when the shares are not retained for earning the dividend income and the dividend income is inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and thus, are in admissible expenses in terms of explanation below Section 37. Considering the above, the total sum of ₹ 5,73,839/- was disallowed. 7. Upon assessee's appeal the ld. CIT(A) observed that the assessee has submitted that the penalties are in the nature of compensatory expenses which is not for infringement of law but these may be for exceeding the limits for which some amount was to be paid to Stock Exchange as a compensation for exceeding the limit. It was further noted that the Assessing Officer has not brought on record any single sum which is paid for the infringement of law by way of penalty to the Stock Exchange Board of India (SEBI) or other statutory bodies. Ld. CIT(A) further noted that the Hon'ble Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see, the penalty charges paid by the assessee are allowed as expenditure except ₹ 1,48,189/- for which the assessee has not given any details. Thus the penalty charge and fine amounting to ₹ 4,25,650/- was allowed as expenditure u/s 37(1) of the Income-tax Act, 1961. Against the above order the revenue is in appeal before us. 8. We have heard both the counsel and carefully perused the records. We find that the ld. CIT(A) has passed an order following the decision of ITAT, Kolkata Bench. The Tribunal has clearly found that when sum have been paid to Stock Exchange for delay in payment of the dues and for various other obligations arising out of carrying on business activities, the penalty charges cannot be said to be for infrin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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