TMI Blog2017 (10) TMI 1599X X X X Extracts X X X X X X X X Extracts X X X X ..... n actual receipt of income which is not includible in total income and section 14A will not apply where no exempt income is received or receivable during the relevant previous year. Both the judgments relied upon by the assessee are applicable to the facts and circumstances of the case and the issue is required to be decided afresh by the AO by keeping in mind that there is a distinction between stock-in-trade and investment. In case, motive behind sale and purchase of shares is to earn profit then the same cannot be treated as trading profit and when the object is to derive income by way of dividend then the profit would have been accrued from the investment as has been clarified by Circular No.18 dated 02.11.2015. Ground decided in favour of the assessee for statistical purposes. Unsecured cash credit claimed as unsecured loan availed - CIT (A) admitted the additional evidence filed under Rule 46A - HELD THAT:- It is settled principle of law that the ld. CIT (A) has coterminus powers to conduct a discreet enquiry as to the genuineness and creditworthiness of the transactions. From the documents brought on record in the form of confirmation of account; copy of bank stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said judgment. 3. Without prejudice to the above grounds, the Ld. ClT (A) has grossly erred in law in not excluding the interest relatable to shares on which no dividend was received particularly when her predecessor had excluded such interest while computing disallowance U/S 14A in the preceding year. The disallowance, if any, could be restricted only to interest in relation to shares on which dividend was received and not the entire interest. 4. That Rule 8D (i) provides that interest directly relatable to exempted income is to be determined but the CIT (A) failed to make such exercise. 5. That no part disallowance of depreciation could be made in respect of flat purchased. 3. The appellant, Income Tax Officer, Ward 14 (4), New Delhi (hereinafter referred to as the Revenue ), by filing the present appeal, sought to set aside the impugned order dated 30.01.2014 passed by the Commissioner of Income-tax-XVII, New Delhi qua the assessment year 2009-10 on the grounds inter alia that :- 1. On the facts and circumstances of the case, the ld. CIT(A) erred in directing the AO to exclude stock in trade of shares from investment for working out 'average of investments& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2017) 391 ITR 218 (P H) contended that the assessee is into the business of trading in shares and has suo motu disallowed an amount of ₹ 4,13,678/- u/s 14A on the earned dividend income of ₹ 44,14,607/- and the AO without recording his dis-satisfaction made further disallowance of ₹ 55,31,601/- and as such Rule 8D is not applicable. Ld. AR for the assessee further contended that in case Rule 8D is found to be not applicable then only taxable income can be taxed. However, on the other hand, ld. DR for the Revenue to repel the arguments addressed by the ld. AR that when the assessee has himself applied the Rule 8D, it cannot challenge the impugned order. 8. Assessee by suo motu disallowed the amount of ₹ 4,13,678/- u/s 14A as per computation given before AO as under:- 1 Expenditure directly relating to Income 2 Expenditure by way of interest not attributable to any particular income or receipt A) Financial charges 18,56,508.00 B) Average value of investment, income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance (P) Ltd. (₹ 51,24,847-) and M/s. Edlweiss Securities Ltd. (₹ 25,56,060/-). The assessee has camouflaged interest amounting @ ₹ 76,80,907/- paid to these two broker concerns under finance charges, whereas, these are nothing but interest charges paid to these two concerns. As the assessee is holding substantial average stock-in-trade (consisting of shares) amounting to approx RS.6.14 crores which are also to be included in investments for the purpose of calculating disallowance u/s 14A, the finance charges paid to these two broker concerns can not be excluded from the amount of interest incurred in relation to the earning of exempt dividend income from investments and stock-in-trade. Hence, total amount of ₹ 95,37,415/- is being taken as interest expenses incurred during the year which can not be specifically and directly attributable to any particular income or receipt for calculating disallowance under rule 80(2)(ii). S.No. Head Particulars Amount (Rs.) (i) Expenses Directly relatable to Income in total Income 50% of bank/demat c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in them and dividend or interest accruing thereon was only a bye-product thereon or an incidental benefit arising thereof, the same would not be subjected to provisions of section 14A of the Act. 12. Hon ble Delhi High Court in case of Cheminvest Ltd. vs. CIT (supra) also held that to attract section 14A, there should have been actual receipt of income which is not includible in total income and section 14A will not apply where no exempt income is received or receivable during the relevant previous year. 13. Both the judgments relied upon by the assessee are applicable to the facts and circumstances of the case and the issue is required to be decided afresh by the AO by keeping in mind that there is a distinction between stock-in-trade and investment. In case, motive behind sale and purchase of shares is to earn profit then the same cannot be treated as trading profit and when the object is to derive income by way of dividend then the profit would have been accrued from the investment as has been clarified by Circular No.18 dated 02.11.2015. All these facts are required to be verified by the AO and then decide the issue in accordance with the judgment cited as Cheminvest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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