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TMI Blog2011 (9) TMI 1040X X X X Extracts X X X X X X X X Extracts X X X X ..... considered the relevant material on record. The ld AR has pointed out that the assessee has earned dividend income of Rs. 1,40,535/- on the shares held as stock-in-trade. He has further submitted that the assessee is a Member of BSE and doing trading in shares. He has referred the balance sheet at page 57 of the paper book as well as the schedule I & J at page 58 of the paper book and submitted that the assessee is having only investment which is equity share of BSE Ltd. He has further pointed out that the assessee's income from brokerage is Rs. 81,31,503/- and income from trading in shares/derivatives is Rs. 5,38,10,325/- whereas the dividend income is only Rs. 1,40,535/- against which a disallowance of Rs, 10,91,935/- has been made by the Assessing Officer u/s 14A. He has further submitted that when the interest expenditure is allowable u/ 36(1)(iii) and the dividend income is earned only on the shares held by the assessee is stock in trade then no disallowance can be made u/s 14A. He has relied upon the order of the coordinate Bench of the Tribunal in the case of Yatish Trading Co P Ltd in 129 ITD 237 (Mum). He has further submitted that the assessee's own fund is Rs. 7,62,00,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re i t is not possible to determine the actual expendi ture incur red "in relat ion to" the income not forming the par t of the total income. But when i t is pos sible to determine the actual expendi ture "in relat ion to" the exempt income or no expendi ture has been incur red "in relat ion to" the exempt income then the pr inciple of apport ionment embedded in sect ion 14A has not application. 37. Even otherwise, the AO has disallowed the interest expendi ture on the bor rowed funds t reating as proportionately used for the investment purposes and not for the reason as used in trading purposes. As evident f rom the assessment order that the very basis of disal lowances i s bor rowed funds used for investment purposes and est imated by the AO in propor t ion of bor rowed fund to the total fund available. Whereas the dividend income is claimed on the shares purchased for t rading purposes and held as stock- in- t rade then the very basis of disallowance by the AO i s incorrect , highly improper and inconsistent to the uncontraverted factual claim. It is pert inent to note that the reason for disal lowance is dividend income which i s not forming the part of the total income and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law, the ld CIT(A) erred in deleting the addition made on account of penalty of Rs. 7500/- on violation of the bye laws of the stock exchange, which are statutory in character and thus amounted to infringement of law." 11 We have heard the ld DR as well as the ld AR of the assessee and considered the relevant material on record. At the outset, we find that identical issue has been decided in favour of the assessee by the Tribunal in assessee's own case for the Assessment Year 2005-06 and 2006-07 while deciding the appeal of the revenue in ITA No.214 & 5528/Mum/2009 vide order dated 30th Nov 2010 in paras 2 & 3 as under: 3. We have heard the parties. The assessee-company is a Member of Stock Exchange, Mumbai and is engaged in the business of trading in shares and stock brokers. The assessee derives income by way of brokerage, trading in securities / derivatives etc. The assessee has claimed the deduction in respect of the payment of the Lease-line charges, transactions charges and VSAT charges paid to the stock exchange. The A.O. made the disallowance of the entire expenditure on the reason that the assessee has not deducted tax at source (TDS) while making payments to the BSE as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source. The above facts also establish that the relationship between the assessee and the jobbers / arbitragers was not of principal and agent but was that of principal to principal. Both had agreed to embark upon a joint venture to trade in shares and securities in the Stock Exchange and to share the profit / loss equally. We do not see how such payments can be termed as payments to contractors for any work to be carried out by them. We therefore uphold the finding of the CIT (A) that these payments do not attract section 194C and the assessee was not liable to deduct tax there from. Accordingly section 40(a)(ia) is also not applicable. The payments, in our view, were rightly allowed as deduction by the CIT (A). The grounds 7 to 10 are dismissed." 15 We, therefore, respectfully following the order of the Tribunal in assessee's own case for Assessment Year 2005-06 & 06-07 decide this issue in favour of the assessee and against the revenue. 16 The next issue is the disallowance of the penalty paid to the Stock Exchange. 17 We have heard the ld DR as well as the ld AR of the assessee and considered the relevant material on record. At the outset, we find that identical issue has b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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