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TMI Blog2023 (12) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee contended that, Revenue, at the fag end of the proceedings came up with the argument that the CIT(A) had taken recourse to an alternate rationale based on the provisions of Section 36(1)(iii) - Revenue contention that although the AO was right in holding that in the balance sheet for FY in issue i.e., FY 2007-08, a part of the shares bought concerning Reliance Industries Ltd. (RIL) was shown as long term investment, they were sold and the profit earned therefrom was offered for imposition of tax. Mr Jain, thus, went on to state that the profit on the sale of all the shares mentioned in Table- II above, which included shares of RIL (except Reliance Liquid Fund) was Rs. 7,10,34,493/-, which as indicated above, was offered for levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only Rs. 35,347/-, the disallowance ordered by the AO amounting to Rs. 5,06,73,874/- could not have been made in view of the position in law - HON'BLE MR. JUSTICE RAJIV SHAKDHER AND HON'BLE MR. JUSTICE GIRISH KATHPALIA For the Appellant Through: Mr Ruchir Bhatia, Sr Standing Counsel with Ms Deeksha Gupta, Adv. For the Respondent Through: Mr Gautam Jain with Mr Piyush Kumar Kamal, Ms Monika Agarwal and Mr Manish Yadav, Advs. RAJIV SHAKDHER, J.: (ORAL) 1. This appeal concerns Assessment Year (AY) 2008-09. Via the instant appeal, the appellant/revenue seeks to assail the order dated 15.06.2017 passed by the Income Tax Appellate Tribunal [in short, Tribunal ]. 2. What is not in dispute is that the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. What is relevant whether the expenditure incurred by the assessee has resulted into exempt income or taxable income. From the three clauses of rule 8D it clearly emerges that stipulation of section is to compute the amount of expenditure which is not allowable u/s 14A as is relatable to the exempt income and not in considering all the expenses one by one for ascertaining if either of them have resulted into exempt income and thereafter considering such amount as disallowable u/s 14A. In above background apportionment of expenses is done applying section 14A read with Rule 8D as under:- Clause Particulars Amount i Expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evata tradelink 08-09. 5. As is evident from the aforementioned extract of the assessment order, the AO had applied Rule 8D of the Rules without having regard to the fact that the exempt income that the respondent/assessee earned was only Rs. 35,347/- and that against the said income, it had suo motu quantified the disallowance under Rule 8D of the Rules as Rs. 87,442/-. 6. In a series of judgments it has been held that the disallowance under Section 14A of the Act read with Rule 8D of the Rules cannot exceed the exempt income. In this regard, it would be useful to extract the observations made in Joint Investments Pvt Ltd v. Commissioner of Income Tax, 2015:DHC:1804-DB: 9. .The third, and in the opinion of this court, imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed as stock in trade by the appellant. The dividend income is bound to be earned on this huge investment of Rs. 119,75,81,172/- in coming years' though the appellant might not have earned dividend income during the year under consideration. Therefore, the claim of the appellant that they were trader in the shares and have not made Long Term investment for earning of dividend income is not correct. I am of the considered view that no income, whether exempt or not, can be earned without making some expenditure in addition to the interest expenditure xxx xxx xxx 5.7 In view of the facts and circumstances of the case and judicial pronouncements discussed above, I hold that the AO was fully justified in making the disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,00,000 shares worth Rs. 1,19,75,81,172/-. 12. The said 6,00,000 shares worth Rs. 1,19,75,81,172/- were sold in the following FY i.e., FY 2008-09 [AY 2009-10] resulting in NIL closing balance. This aspect is evident from Table - III. Once again, the facts and figures given in the said table are not in dispute. 13. It is Mr Jain s contention that although the AO was right in holding that in the balance sheet for FY in issue i.e., FY 2007-08, a part of the shares bought concerning Reliance Industries Ltd. (RIL) was shown as long term investment, they were sold and the profit earned therefrom was offered for imposition of tax. Mr Jain, thus, went on to state that the profit on the sale of all the shares mentioned in Table- II above, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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