TMI Blog2013 (11) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had disallowed 5% of the dividend income under section 14A of the Act - No valid basis adopted by the assessee, the AO was right in rejecting the method adopted by the assessee for disallowance computed under section 14A of the Act. Since there is no defect in the calculation of the AO which is as per section 14A r.w. Rule 8D, the case is decided against the Assessee. - I.T.A. No. 1429/MUM/2012 - - - Dated:- 28-8-2013 - Shri I. P. Bansal, JM And Shri Sanjay Arora, AM,JJ. For the Appellant : Shri K. Shivram Ajay Singh For the Respondent : Mrs. Bhavana Yashroy ORDER Per I. P. Bansal,J.M:- This is an appeal filed by the assessee. It is directed against the order passed by Ld. CIT(A)8, Mumbai dated 9/12/2011 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h investment is not exempt from tax and therefore such "investment" does not fall within the scope and ambit of the disallowance provisions of section 14A read with rule 8D of the Rules. The appellant therefore prays that such investment in unquoted shares be excluded while applying the disallowance provisions of section 1 4A read with rule 8D of the Rules. The appellant therefore, prays that the additional disallowance of Rs. 19,56,521/- made u/s. 14A read with rule 8D be deleted." 2. The assessee in the present case is a share and stock broker. It has earned dividend income amounting to Rs.87,00,367/-, which is exempt under section 10(38) of the Income Tax Act, 1961 (the Act). The AO invoked Rule 8D and calculated the disallowance u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come and they are incurred only to run day to day business activity. It was submitted that even if dividend income is not earned, the assessee had to incur such expenditure. Thus, it was claimed that disallowance made by the AO should be deleted. Ld. CIT(A) has rejected all such contentions of the assessee. He observed that assessee did not maintain any separate record for expenditure incurred in respect of earning of dividend income . The onus was on the assessee and not on the AO to prove that such expenditure have been incurred . In absence of relevant details it was not possible to directly determine the expenditure incurred for earning dividend income, therefore, AO has rightly applied provisions of Rule-8D. Ld. CIT(A) has referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital gain on sale of unquoted investment is not exempt under section 10(38), the investment to that extent under Rule 8D should be excluded. For this purpose Ld. AR relied upon the following decisions:- 1. Sundaram Asset Management Company Ltd. vs. DCIT(Mad) (Trib) in ITA No.1774/Mad/2012 , A.Y. 2008-09, order dated 19/7/2013. -- Exempt income - Short term gain- Rule 8D does not apply to short term investments gains since assessee is paying capital gain tax. 2. DCIT vs. Ashish Jhunjhunwala, ITA No.1809/Kol/2012, A.Y. 2009-10, order dated 14/5/2013 - Assessing Officer has not examined the accounts nor there is satisfaction recorded by the Assessing Officer about the correctness of the claim of assessee and without the same he had invoked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn Long Term Capital Gain on theseShares. Value of Investment to be considered for Rule8D(2) Average Investments (21,76,228 + 38,18,72,615) 2 Disallowance @ 0.5% of Average Investments 80,000,000 80,000,000 10,000,000 7,814,512 19,237,131 _____________ 217,691,228 80,000,000 80,000,000 - - - _____________ 381,872,615 299,781,922 ______________ 1,498,910 ============ 4.2 Thus it was submitted by Ld. AR that appropriate relief should be given to the assessee. 5. On the other hand, Ld. DR relied upon the order passed by Ld. AR and Ld. CIT(A). 6. We have heard both the parties and their contentions have carefully been considered. Undisputedly as the impugned assessment is A.Y 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the said case it was the contention of the assessee that Rule-8D will not apply to short term investment as capital gain arising there from is taxable. However, in the present case even investment in unquoted shares did not result into short term capital gain during the year. If any dividend income was earned thereon the same was exempt as the value of investment in unquoted shares stood included at the last day of the financial year in the balance sheet. Therefore, facts of the present case are different from the facts of that case. It cannot also be the case of the assessee that AO did not record his satisfaction about the incorrectness of the claim of the assessee whereby assessee had disallowed 5% of the dividend income under section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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