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TMI Blog2021 (5) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance made under section 14A of the Income Tax Act, 1961 from Rs. 20,14,13,586/- to Rs. 1,45,OO,OOO/-. 2. The learned CIT(Appeals) has failed to appreciate the fact that the disallowance under section 14A of the Income Tax Act has to be necessarily quantified as per the procedure laid down in Rule 8D of Income Tax Rule, 1962. 3. Any other grounds that may be urged at the time of hearing." 2.1 The assessee has raised the following grounds of appeal: "Based on the facts and circumstances of the case, Edelvalue Partners (hereinafter referred to as 'the Appellant') respectfully craves leave to prefer an appeal against the Commissioner of Income Tax (Appeals)-6 (hereinafter referred to as 'CIT(A)'), Hyderabad's ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss from equity shares vis-a-vis total income of the Appellant. Without prejudice to above, even if the AO proposes to apply Rule 8D in appellant's case, the amount of disallowance works out to Rs. 55,97,187 being 0.5% of the average value of stock in trade on the first ana last day of the previous year as per Rule 8D(2)(iii) of the I.T. Rules. The appellant craves leave to add, amend and alter the above grounds of Appeal." 3. On perusal of record, we find that there is a delay of 2 days in filing appeal by the revenue before the ITAT and the same was duly explained by the CIT-DR. Since the delay was prevented by a reasonable cause, the same is condoned and the appeal is admitted for adjudication, to which, the ld. AR of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be made u/s 14A of the Act. 6. Aggrieved by the order of CIT(A), both the revenue as well as assessee are in appeals before the ITAT. 7. Before us, the ld. AR of the assessee submitted that the CIT(A) was not justified in partly allowing the appeal of the assessee by holding that the assessee was in business of trading in derivatives/purchase and sale of scrips and he ought to have restricted the disallowance to Rs. 38,37,427/- being suo-moto disallowance computed by it u/s 14A of the Act as expenditure incurred for earning the exempt income. In this connection, he invited our attention to paper book at page 1. He also invited our attention to page 20 of the paper book where the break-up of the expenses of disallowance of Rs. 38,37,247/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T [2018] 91 taxmann.com 154 (SC) wherein the Hon'ble Apex Court held as under: "39) In those cases, where shares are held as stock-in-trade, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elling them to earn profits. The situation here is, therefore, different from the case like Maxopp Investment Ltd. where the assessee would continue to hold those shares as it wants to retain control over the investee company. In that case, whenever dividend is declared by the investee company that would necessarily be earned by the assessee and the assessee alone. Therefore, even at the time of investing into those shares, the assessee knows that it may generate dividend income as well and as and when such dividend income is generated that would be earned by the assessee. In contrast, where the shares are held as stock-in-trade, this may not be necessarily a situation. The main purpose is to liquidate those shares whenever the share price ..... X X X X Extracts X X X X X X X X Extracts X X X X
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