TMI Blog2014 (2) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... rred the interest expenses in relation to the activity of trading in shares and to apply the formula given in Rule 8-D for the purpose of making disallowance out of interest on such verification - He has also rightly rejected the contention of the assessee that the average value of investment in its books is nil after having found the same to be in-correct – Relying upon Income-tax Officer, Ward 6(2) (2), Mumbai Versus Daga Capital Management (P.) Ltd. [2008 (10) TMI 383 - ITAT MUMBAI ] - the decision rendered by the CIT(A) on the issue is well founded and the revenue has not been able to raise any material contention to dispute this position – order of the CIT(A)0 upheld – Decided against Revenue. - ITA No.988/Mum/2012 - - - Dated:- 21-8- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said exempt income as required by Section 14A of the Act. During the course of assessment proceedings, the assessee was called upon by the A.O. to explain the basis of disallowance so made u/s 14A of the Act. In reply, the following submission was made by the assessee vide letter dated 30-04-2010:- There have been no specific expenses incurred to earn the dividend income of Rs. 474,224/-. The dividend income is incidental to the business of assessee. The major expenses of the assessee are on account of purchase and sell of shares, other administrative expense Personnel, Administration, audit fees, Key Man insurance Premium, interest paid to brokers for user of funds for F O activity, trading activity etc. The income from such acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,71,461 3. 0.5% of the B above 2,44,554 Total disallowance u/s 14A 2,44,554 Accordingly a further disallowance of Rs. 49,68,593/- was made by the A.O. u/s 14A of the Act in the assessment completed u/s 143(3) of the Act vide an order dated 8-6-2010. 4. Against the order passed by the A.O. u/s 143(3) of the Act, appeal was preferred by the assessee before the ld. CIT(A) challenging the disallowance made by the A.O. u/s 14A read with Rule 8-D of the Income Tax Rules, 1962 and the following submissions were made on behalf of the assessee before the ld. CIT(A) in support of its case: (i) the A.O. has not given justification for application of Rule 8D for computing disallowance u/s 14A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o disallowance made by the appellant at Rs. 47,422/-. The Assessing Officer, was therefore correctly not satisfied with appellant s own disallowance and under the circumstances, Assessing Officer s action to make disallowance as per rule 8D is correct. 4.1 The appellant s submission that the interest expense has been incurred towards payments to brokers and it has direct nexus with earning of business income is found to be prima-face correct. The appellant submitted that it has paid interest to the following seven parties: Party name Nature of interest Exp. Amount (Rs.) Sunidhi Capital Pvt. Ltd. Broker 6,75,199 Kotak Mahindra Inv. Ltd. NBFC 34,22,588 Kota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance to be made u/s 14A of the Act by applying Rule 8-D. He has identified the common expenses which were partly attributable to the earning of exempt dividend income and accordingly has quantified the disallowance to be made out of the said expenses on proportionate basis. He has also directed the A.O. to verify the stand of the assessee of having incurred the interest expenses in relation to the activity of trading in shares and to apply the formula given in Rule 8-D for the purpose of making disallowance out of interest on such verification. He has also rightly rejected the contention of the assessee that the average value of investment in its books is nil after having found the same to be in-correct relying on the decision of S ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
