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2015 (12) TMI 1456 - ITAT PUNE

2015 (12) TMI 1456 - ITAT PUNE - TMI - Disallowance u/s.14A - CIT(A) deleted the addition on the ground that provisions of section 14A r.w.Rule 8D are not applicable to dividend income on shares held as stock in trade - Held that:- As decided in case of Kunal Polymers Pvt. Ltd. [2015 (10) TMI 2373 - ITAT PUNE ] it is an undisputed fact that the shares are held by the assessee as stock-in-trade. The assessee has earned dividend income on such shares. The assessee has not held the shares for earni .....

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No.1903/PN/2013 - Dated:- 4-9-2015 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Assessee : Shri S.K.Tyagi For The Department : Shri Hitendra Ninave ORDER PER R.K. PANDA, AM : This appeal filed by the Revenue is directed against the order dated 22-05-2013 of the CIT(A)-II, Pune relating to Assessment Year 2010-11. 2. The grounds raised by the Revenue are as under : (1) The Learned Commissioner of Income-tax (Appeals) erred In allowing ₹ 75,51 ,867/-. (2) The Learned Commissioner .....

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id to have been incurred only for earning the taxable income and not exempt income and as such, the assessee had incurred interest expenditure & other administrative expenses for the purpose of earning exempt income, thereby justifying the invoking of provisions of section 14A of the Act. (4) The appellant craves leave to add, alter or amend any or all the grounds of appeal. 3. Facts of the case, in brief, are that the assessee is an individual engaged in the business of trading in shares. H .....

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le since the assessee was in receipt of exempt income. It was submitted that the income from dividend is purely incidental to the business of the assessee. The assessee is engaged in the business of trading in shares and has not purchased any shares for the purpose of earning dividend. All the shares are held as stock in trade. No expenditure has been incurred for earning the dividend income. Relying on the decision of Hon ble Karnataka High Court in the case of CCI Ltd. Vs. JCIT reported in 71 .....

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tions including the business which is yielding exempt income, therefore, the expenditure attributable to earning of exempt income can only be reasonably determined by invoking Rule 8D. Since the dividend is exempt from tax, expenditure incurred to invest in shares is not allowable as deduction, even if assessee is engaged in the business of trading in shares. He observed that assessee has an investible capital of ₹ 1.51 crores and the turnover in shares is ₹ 24 crores and the closing .....

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he purpose of investment and the shares are held as stock in trade and the dividend income by the assessee is only incidental to the business of trading in shares, therefore, no disallowance u/s.14A is called for. 6. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 7. The Ld. Departmental Representative heavily relied on the order of the AO. He also relied on the decision of the Mumbai Bench of the Tribunal in the case of D.H. Securities Pvt. Ltd. Vs. DCIT reported in .....

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e case of DCIT Vs. M/s. India Advantage Securities Ltd. has held that no disallowance u/s.14A r.w. Rule 8D can be made on dividend income on shares which are held as stock in trade. He accordingly submitted that this being a covered matter in favour of the assessee the grounds raised by the Revenue should be dismissed. 9. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also consider .....

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the addition on the ground that provisions of section 14A r.w.Rule 8D are not applicable to dividend income on shares held as stock in trade. 10. We find an identical issue had come up before this Bench of the Tribunal in the case of Kunal Polymers Pvt. Ltd. (Supra) to which both of us are parties. In that case also, the AO had made disallowance u/s.14A on dividend received on shares held as stock in trade which was upheld by the CIT(A). On further appeal by the assessee the Tribunal deleted th .....

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e question before us is : Whether disallowance u/s. 14A is to be made on dividend received on shares held as stock in trade ? It is an undisputed fact that the shares are held by the assessee as stock-in-trade. The assessee has earned dividend income on such shares. The assessee has not held the shares for earning dividend income. Dividend income is incidental to the share trading business of the assessee. Thus, no disallowance u/s. 14A is warranted on dividend earned on shares held as stock-in- .....

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