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2012 (12) TMI 121 - AT - Income TaxRebate under sec. 88E(1) of the Income tax Act, 1961 – alleged that the assessee earned income on scrips which were not listed on the stock exchange or traded in securities before those were listed thereby implying that no STT was paid on such transactions - contention of the assessee is that the assessee has not claimed the rebate in respect of transactions which have not been made through Stock Exchange – Held that:- According to the AO, the assessee had earned income on scrips which were not listed on Stock Exchange or traded in securities before those were listed. Therefore, the contention of the assessee has to be verified whether the assessee has claimed the rebate in respect of any transaction on which no STT was paid. Subject to verification, the AO is directed to allow rebate in respect of Income-tax payable on the income from taxable securities transactions reckoned at average rate of tax payable or securities transaction tax, whichever is lower Disallowance made under sec. 14A of the Act – Held that:- AO can make disallowance under sec. 14A if there is a direct nexus between the expenditure incurred and the exempt income - AO has made disallowance under Rule 8D which is not applicable for the year under consideration - AO was not justified in invoking the provisions of Rule 8D of the Income-tax Rules. As regards estimation of disallowance @ 10% of exempt income, learned CIT(A) has estimated disallowance on ad hoc basis without establishing any nexus between the expenditure incurred and the exempt income - neither the AO nor the ld. CIT(A) has examined any nexus between the exempt income and expenditure incurred – matter remanded to AO
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