2014 (9) TMI 434 - DELHI HIGH COURT

Dividend on income disallowed u/s 14A - Whether the Tribunal was right in deleting the disallowance u/s 14A holding that no dividend income was earned by the assessee ignoring the provisions u/s 14A – Held that:- The Tribunal rightly observed that there was a contradiction in the submissions made by the revenue that the assessee had acquired shares for earning of dividends – relying upon Additional Commissioner of Income-tax, Circle 1(1) Versus Spray Engineering Devices Ltd. [2012 (7) TMI 587 - ITAT CHANDIGARH] - Income exempt u/s 10 in a particular AY, may not have been exempt earlier and can become taxable in future years - whether income earned in a subsequent year would or would not be taxable, may depend upon the nature of transaction entered into in the subsequent AY – LTCG on sale of shares is presently not taxable where security transaction tax has been paid, but a private sale of shares in an off market transaction attracts capital gains tax - assessee is an investment company and had invested by purchasing a substantial number of shares and thereby securing right to management.

The entire or whole expenditure has been disallowed as if there was no expenditure incurred by the assessee for conducting business - CIT(A) has positively held that the business was set up and had commenced - Expenditure had to be also incurred to protect the investment made - genuineness of the expenses and the fact that it was incurred for business activities was not doubted by the AO and has also not been doubted by the CIT(A) – Decided against revenue.