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2019 (12) TMI 1600 - AT - Income TaxDisallowance @10% of the dividend u/s 14A - case of the appellant is that all the scripts of investments are held by it as stock in trade, therefore, no disallowance u/s 14A can be made - DR submitted that provisions of section 14A will apply even if the assessee has shown the investment generating exempt income as stock in trade - HELD THAT:- As submitted that investments are held by assessee as stock in trade. In the present case the issue is squarely covered by the decision of Maxoop Investment Ltd [2018 (3) TMI 805 - SUPREME COURT] as held that when the share are held as stock in trade, it becomes the business activity of the assessee. Whether the dividend earned or not is immaterial. It would be “quirk of fate‟ if the dividend is received. The Hon‟ble Supreme Court thus held that in such cases there cannot be any disallowance u/s 14A of the Act. Thus, the fact is not denied that assessee is holding exempt income generating investment as stock in trade, the disallowance made by the ld Assessing Officer and confirmed by the ld CIT(A) is not sustainable. Accordingly, we direct the ld Assessing Officer to delete the disallowance u/s 14A of the Act. Deduction u/s 36(1)(viii) -Addition of interest on housing loans - HELD THAT:- In the present case the methodology adopted by the assessee is consistently followed for last eight years. Same was accepted by the revenue without any objection. The only issue is with respect to how the profit of the business for the purpose of long term housing finance shall be worked out. The only issue is that assessee is computed with respect to the total income with respect to the interest income whereas the ld AO has applied the above ratio to the total receipt. When the method has been consistently accepted for the above year we do not find any reason to defer from that. In view of this we do not find any infirmity in allowing the assessee claim of deduction u/s 36(1)(viii) of the Act applying the ratio of 62.75%. In the result we do not find any merit in ground No. 1 of the appeal. Hence, it is dismissed. Disallowance u/s 14A - CIT(A) deleted the disallowance as per Rule 8D but retained 10% of such disallowance - HELD THAT:- AO has not recorded any satisfaction with respect to the expenditure incurred in relation to exempt income. Therefore, on this account the disallowance cannot be made by the ld Assessing Officer under that section without recording satisfaction that assessee has incurred some expenditure in relation to exempt income. Further as held by us in appeal of the revenue for AY 2009-10 that assessee is holding these investments as stock in trade no disallowance can be made. For the reasons given by us in the appeal of the assessee wherein, we have directed to delete the disallowance, this ground of appeal of revenue is also deserves to be dismissed. Accordingly, ground No. 2 of the appeal is dismissed.
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