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2013 (12) TMI 720 - AT - Income TaxNon-allowance of the credit of Securities Transaction Tax (STT) u/s. 88E in view of the assessee's tax liability for the current year being determined u/s 115 JB - MAT - CIT(A) allowed the assessee's claim - Held that:- No infirmity in the impugned order; the same being rather the consistent view of the Mumbai Benches of the Tribunal. The order by the Tribunal in the case of Horizon Capital Ltd. (supra) has been since confirmed by the high court in CIT v. Horizon Capital Ltd. [2011 (10) TMI 489 - KARNATAKA HIGH COURT]. We, may, however, clarify that the rebate u/s. 88E is only in respect of the tax chargeable under the head profit and gains of business or profession, and not any other. As such, only as much of tax under the MAT provisions which relates to the income, though based on book profit, attributable to the profits of the assessee's business arising from taxable securities transactions, would stand to be allowed, in view of the qualifying condition of section 88E. Disallowance u/s. 14A read with rule 8D - assessee contests the same on the basis that the investment under reference, i.e., on which the dividend income stands received by it, being shares in different companies, are held by it as stock-in-trade, and not as investment, so that rule 8D(2)(ii) is not applicable - Held that:- Rule 8D shall apply qua the shares held as stock-in-trade. See ITO vs Daga Capital Management Pvt. Ltd. (2008 (10) TMI 383 - ITAT MUMBAI). The language of rule 8D(2)(ii) itself provides the mandate inasmuch as it prescribes or authorizes a disallowance only qua investment income from which is not taxable, so that in limiting the amount worked out with reference to the total investment; the same also yielding taxable income, we have only sought to operationalize the said rule. It would also be appreciated that not doing so would also violate the principle of only net income (from any source) being subject to tax inasmuch as a disallowance for the total interest as per rule 8D(2)(ii) would in effect bring the share trading income to tax without deduction of the interest expenditure allocable or attributable thereto The assessee, in the instant case, has suo motu disallowed ₹ 1,22,295/-. Its argument for non-application of s.l4A(l) is thus even otherwise infirm. The disallowance by the Revenue, per rule 8D, works to ₹ 12,23,627/-, a part of which stands to be deleted and the balance confirmed, as indicated above. Under the circumstances, the assessee gets part relief. - Decided partly in favour of assessee.
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