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2014 (8) TMI 1014 - AT - Income TaxDisallowance u/s.14A in relation to dividend income on shares held as stock-in-trade - Held that:- Taking into consideration the fact that the primary object of holding the shares is trading and the dividend income is incidental and further that due to continuous activity of sale and purchase of the shares, the annual turnover would be much higher in case of share trading as compared to the investments made for the purpose of earning of exempt income, even the disallowance @ 20% of the amount calculated under Rule 8D(2)(ii) will be on higher side. We feel that it will be appropriate if the said disallowance is restricted to 5% of the amount so arrived. So far the disallowance under Rule 8D(2)(iii) is concerned, since in the share trading activity, investment is not made for the purpose of earning exempt income, hence, the managerial/administrative expenses in relation to dividend income calculated under Rule 8D(2)(iii) are also required to be scaled down which we think that should be restricted to 10% of the amount so calculated under Rule 8D(2)(iii). In view of our above observations, the disallowance u/s.14A read with Rule 8D is, accordingly, restricted to 5% of the amount arrived at under Rule 8D(2)(ii) and 10% of the amount calculated by the A.O. under Rule 8D(2)(iii). - Decided partly in favour of assessee
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