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2013 (9) TMI 608 - AT - Income TaxDisallowance u/s 14A by invoking Rule 8D - Whether the assessee was claiming exempt income and whether any expenditure had been incurred to earn the exempt income - Held that:- It cannot be said that no borrowed funds had ever been utilized by assessee for the purpose of making investment or undertaking transactions which yielded dividend income, which had been claimed as exempt - The assessee had not disputed the fact that it failed to produce any cash flow statement or any other material which could establish that borrowed funds had not been utilized for earning of exempt income. The contention of AR that no satisfaction had been recorded by AO before invoking Rule 8D, according to us, had no merits particularly when the AO at the time of making the assessment confronted the assessee in respect of investment in shares and expenses claimed and particularly when the AO asked the assessee as to why disallowance be not made u/s 14A read with Rule 8D of the Act in respect of the exempt dividend income. Revised Long Term Capital Gain – Method of Charging Depreciation - Whether the assessee was justified to allocate the WDV of the Bombay Stock Exchange card to the cost of acquisition during the course of assessment proceedings and was to be allowed or not Held that:- The ld. CIT(A), was not justified in not considering the revised Long Term Capital Gains on sale of shares - The said revised computation of Long Term Capital Gains filed by the assessee had to be considered to adjudicate the issue as per law - Hence, we set aside the orders of authorities below and restore this issue to the file of AO with a direction to compute Long Term Capital Gain by considering the cost of shares taking into account the WDV of the Stock Exchange card - Long Term Capital Gain in respect of the shares hae to be considered after assigning the WDV of the Bombay Stock Exchange Card to the cost of 10000 shares allocated to the assessee - It was observed that the assessee in the assessment year under consideration has sold 4562 shares, therefore, proportionate cost of said Bombay Stock Exchange card has to be assigned to the said shares while computing the Long Term Capital Gains. From section 55(2)(ab) of the Act, it was evident that on demutualization or corporatization of the Bombay Stock Exchange, in the case before us, the cost of acquisition of ownership right and trading rights have been split - The trading rights were based on deposit system and in the case of existing member its cost deemed to be nil - The entire value of Bombay Stock Exchange card, as stands in the books of account of the assessee on the date of demutualization of Bombay Stock Exchange would be assigned to the shares allocated to said members - the claim of assessee to claim depreciation on demutualization or corporatization of the stock exchange of the Bombay Stock Exchange Card was not justified and legal - Therefore, the same was rightly denied by AO in the assessment year under consideration – the appeal taken by assessee were allowed for statistical purposes by restoring the issue to the file of AO with a direction to compute Long Term Capital Gains.
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