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2014 (2) TMI 1067 - ITAT MUMBAIDisallowance u/s 14A of the Act r.w Rule 8D of the Rules - Dividend Income - Whether the disallowance u/s 14A r/w rule 8D can be with regard to the dividend earned on the shares held as stock-in-trade – Held that:- The decision in DH SECURITIES PVT LTD Versus DEPUTY COMMISSIONER OF INCOME TAX [2013 (12) TMI 720 - ITAT MUMBAI] and GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] followed - even though the shares have been held as stock-in-trade, the dividend income earned on such shares has to be examined for the purpose of disallowance under section 14A - the disallowance under section 14A has to be worked out even when the dividend income has been accrued on the shares held as stock-in-trade - Once the shares which yield tax exempt dividend income, then it cannot be held that under the formula, the entire interest expenditure is to be disallowed under the said formula as these shares are also held as stock-in-trade, which yields trading income which is taxable - while arriving at the disallowance of rule 8D, disallowance of interest expenditure should be restricted to 20% of the exempt income i.e., dividend income – thus, the order of the CIT(A) set aside – Decided partly in favour of Assessee.
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