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2016 (10) TMI 988 - ITAT DELHIDisallowance u/s. 14A read with Rule 8D - AO has invoked the provisions of rule 8D holding that the implication of the said rule is automatic and has nothing to do with the earning of income during the year under consideration - CIT(A) has upheld the addition made by the AO by holding that the provisions of section 14A are also applicable in case of stock-in-trade - Held that:- As during the year under consideration, assessee had a long term capital gain of ₹ 54,74,924/- alongwith dividend income on mutual funds and shares for ₹ 46,55,903. Also further note that the assessee has incurred bank charges and interest expense amounting to ₹ 19,42,045.95 during the year under consideration, complete details were filed by the assessee before the AO as well as Ld. CIT(A) and no loan has been taken by the assessee during the year as is evident from the balance sheet of the assessee. The said interest has been paid by the assessee to the financiers who have funded the IPOs as is evident from the records, and there is no dividend income from transaction. Since the business of the assessee is sale and purchase of shares, all the interest has been paid in relation to normal business income, and cannot be allocated for the purpose of disallowance u/s. 14A read with Rule 8D. Find considerable cogency in the contention of the Ld. Counsel of the assessee that it is a settled law that the disallowance u/s. 14A read with Rule 8D should only be made with regard to investments and not with the regard to share held as stock-in-trade. The assessee is in the business of sale and purchase of shares and mutual funds and the shares were held as stock in trade, therefore, provisions of section 14A read with Rule 8D are not applicable. - Decided in favour of assessee.
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