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2015 (8) TMI 1 - ITAT KOLKATA

2015 (8) TMI 1 - ITAT KOLKATA - TMI - Disallowance of expenses relatable to exempt income by invoking the provisions of section 14A of the Act read with Rule 8D - CIT(A) deleted the addition - Held that:- The provisions of section 14A read with Rule 8D of the Rules will not apply to the shares held as stock in trade. Keeping in view the decision of Hon'ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. (1973 (1) TMI 1 - SUPREME Court ) and as the Hon'ble Karnataka High Court in the .....

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the Act will be allowed even though the income is to be assessed u/s. 115JB of the Act. See Commissioner of Income-tax Versus Horizon Capital Ltd. [2011 (10) TMI 489 - KARNATAKA HIGH COURT ] - Decided against revenue. - ITA No. 789/Kol/2012 - Dated:- 22-5-2015 - P K Bansal, AM And Mahavir Singh, JM,JJ. For the Appellant : Shri Kalyan Nath, JCIT For the Respondent : Shri Subash Agarwal, Adv. ORDER Per: Mahavir Singh: This appeal by revenue is arising out of order passed by CIT(A)-VI, Kolkata vide .....

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see has not opposed the Condonation rather he conceded that delay can be condoned. In view of the above reasons given in the Condonation petition and concession given by Ld. Counsel for the assessee, we condone the delay and admit the appeal. 3. The first issue in this appeal of revenue is against the order of CIT(A) deleting the addition made by AO on account of disallowance of expenses relatable to exempt income by invoking the provisions of section 14A of the Act read with Rule 8D of the I. T .....

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hares are stock-in-trade only. According to Ld. Counsel, this issue is now covered by the decision of Hon'ble Kerala High Court in the case of CIT Vs. Leena Ramachandran (2011) 339 ITR 296 (Ker), wherein it has been held as under: "Held, allowing the appeal, that any expenditure incurred for earning any income which was not taxable under the Act was not an allowable expenditure. Dividend income was exempt under section 10(33) of the Act and the dividend earned by the assessee on the sha .....

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Act on the borrowed funds utilized for the acquisition of shares only if shares were held as stock-in-trade and that would arise only if the assessee was engaged in trading in shares. So far as the acquisition of shares was in the form of investment and the only benefit the assessee derived was the dividend income which was not assessable under the Act, the disallowance under section 14A was squarely attracted and the Assessing Officer rightly disallowed the claim." Further, this issue has .....

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herefrom is offered to tax as business income. The remaining 37% of the shares are retained. It has remained unsold with the assessee. It is those unsold shares have yielded dividend, for which, the assessee has not incurred any expenditure at all. Though the dividend income is exempted from payment of tax, if any expenditure is incurred in earning the said income, the said expenditure also cannot be deducted. But in this case, when the assessee has not retained shares with the intention of earn .....

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uire to be set aside. Accordingly, we pass the following: i) Appeal is allowed. ii) Impugned orders are hereby set aside iii) The substantial question of law is answered in favour of the assessee and against the revenue." 5. From the above, it is clear that the provisions of section 14A read with Rule 8D of the Rules will not apply to the shares held as stock in trade. However, Ld. CIT, DR stated that Hon'ble Delhi High Court is contrary to the above two decisions. The Hon'ble Delhi .....

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gainst the revenue by respectfully following the above decisions. 6. The next issue in this appeal of revenue is against the order of CIT(A) in allowing rebate u/s. 88E of the Act even though the income is assessed u/s. 115JB of the Act. For this, revenue has raised following ground no.2: "2. That on the facts and circumstances of the case, Ld. CIT(A) erred in law in allowing rebate u/s. 88E against MAT u/s. 115JB of the Act." 7. At the outset, it is to be mentioned that even though th .....

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on 115JB has no substance. In other words, when the total income is assessed and the tax chargeable is computed, it is from that tax which is chargeable, the tax paid under section 88E is given deduction, by way of rebate, under section 87 of the act. This is the legislative intent. That is a promise to give deduction of the tax already paid. This is the mode in which tax already paid is handed back at the time of final computation." 8. We find that the issue is now covered by the decision .....

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