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TMI Blog2015 (12) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... had no jurisdiction to do so when the Appellant had voluntarily disallowed Rs. 53,518, being 5% of exempt income; and the case was covered by Rule 8D (1). 2. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in upholding action of the Assessing Officer in disallowing Rs. 971,849 invoking provisions of Rule 80 read with section14A against dividend income of Rs. 1,070,360 ignoring the fact that, the Appellant is a Trader in shares and securities, and dividends were incidental to its holding shares and securities. 3. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in upholding action of the Assessing Officer in treating i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the action of Assessing Officer before the CIT(A) but could not succeed as the CIT(A) has confirmed the disallowance made by Assessing Officer u/s 14A. 3. Before us, the Ld. Authorized Representative of the assessee has submitted that the assessee has not incurred any expenditure for earning the dividend income. He has pointed out that the assessee is a stock trader and did not hold any investment in shares and securities, therefore, the entire expenditure on account of interest as well as other expenses have been incurred by the assessee for the purpose of trading activity. Whatever direct expenses incurred for earning the dividend income has already been disallowed by the assessee. He has further submitted that the assessee has received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the decision of this Tribunal in the case of Damani Estates & Finance Pvt. Ltd. in ITA No. 3029/Mum2012 dated 17.07.2013 as relied upon by the CIT(A) 5. We have considered the rival submissions as well as relevant material on record. Though the assessee has raised various contentions on this issue, however, we find that the assessee is a stock trader and not holding any investment in shares and securities then so far as interest expenditure is concerned, the same cannot be attributable or allocable for earning the dividend income which is only an incidental income and not intended income of the activity of the assessee being trading in shares and securities. We find that in a series of decisions, this Tribunal has decided this issue by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received from trading shares. The Tribunal had however, distinguished the said judgment of Hon'ble High Court of Kerala on the ground that in that case the acquisition of shares with the borrowed funds was for the purpose of controlling the company. Therefore, even though the purpose for acquiring the shares was business, the High Court had upheld the disallowance u/s.14A of the I.T. Act. The Tribunal also noted that the High Court in that case had only observed that the interest paid on borrowed funds utilised for acquiring shares could be allowed as deduction u/s.36(1)(iii) only if shares were held as stock-in-trade. These observations were only obiter dicta and not the ratio decidendi of the judgment. The ratio decidendi of the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal. The High Court noted that 63% of shares which were purchased were sold and income derived was offered to tax as business income. The remaining 30% of shares which remained unsold had reverted to dividend income for which the assessee had not incurred any expenditure at all. The High Court also observed that the assessee had not retained the shares with the intention of earning dividend income which was incidental due to his sale of shares which remained unsold by the assessee. The High Court, therefore, did not uphold the order of the Tribunal disallowing the expenditure in relation to the dividend from shares. Thus there being a direct judgment of a Hon'ble High Court on this issue, the same has to be followed in preference to the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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