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TMI Blog2014 (12) TMI 1152X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance made u/ s 14A r.w. Rule 8D (2)(ii), without appreciating the fact that as per the provisions of the said rules there is no such distinction." 2. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) was justified in allowing relief to the assessee in respect of disallowance made u/ s 14A r.w. Rule 8D (2)(ii), without appreciating the fact that as per the provisions of Section 14A(2), once the AO is not satisfied with the correctness of the claim of the assessee in respect of expenditure claimed, he has no option but to disallow such expenditure in accordance with method prescribed under Rule 8D(2)(ii). 2. The assessee company is engaged in the business of dealing in Future & Option as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncerned. 5. On the other hand, the Ld. Authorized Representative has submitted that in the latest decision dated 27.08.2014 of this Tribunal in the case of Ramkumar Venugopal Investments Pvt. Ltd. Vs. ACIT in ITA no. 6324//Mum2012, the Tribunal after considering the third member decision in the case of D.H. Securities Ltd. Vs. DCIT, has held that the disallowance should be restricted to 5% of the amount arrived under Rule 8D(2)(ii)(iii) and 10% of the amount calculated by the Assessing Officer under Rule 8D(2)(iii). 6. Having heard the rival submissions as well as careful perusal of relevant material on record, we are of the view that when the assessee is in the business of share trading as well as future & option then the expenditure inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for purchase and sale of shares even held as stock in trade for business purposes. The expenditure attributable towards earning of exempt income, immaterial of the fact whether such exempt income was actually earned or not, is embedded in the expenditure incurred for share trading activity and is liable to be apportioned in the light of the provisions of section 14A of the Act. The decision of the Hon'ble Karnataka High Court relied upon by the assessee has been duly discussed and distinguished in the Third Member Case of "D.H. Securities (P) Ltd. vs. DCIT"(supra). However, it has been further observed in the said Third Member decision of the Tribunal that the shares which yield tax exempt dividend income, interest qua which is to be di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in the case of Damani Estates & Finance Pvt. Ltd. (in ITA No. 3029/Mum/2012 dated 17.07.2013). 4. In our view, taking into consideration the fact that the primary object of holding the shares is trading and the dividend income is incidental and further that due to continuous activity of sale and purchase of the shares, the annual turnover would be much higher in case of share trading as compared to the investments made for the purpose of earning of exempt income, even the disallowance @ 20% of the amount calculated under Rule 8D(2)(ii) will be on higher side. We feel that it will be appropriate if the said disallowance is restricted to 5% of the amount so arrived. 5. So far the disallowance under Rule 8D(2)(iii) is concerned, since in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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