TMI Blog2012 (11) TMI 1166X X X X Extracts X X X X X X X X Extracts X X X X ..... ance made by the AO is, therefore, deserved to be deleted. - I.T.A. No. 5281/M/2011 - - - Dated:- 21-11-2012 - D. Karunakara Rao (Accountant Member) And Vivek Varma (Judicial Member) For the Petitioner : Parthasarathi Naik For the Respondent : Dr. K. Shivaram, Ajay R. Singh ORDER D. Karunakara Rao (Accountant Member) This appeal filed by the Revenue on 11.7.2011 is against the order of CIT (A)- 21, Mumbai dated 21.4.2011 for the assessment year 2008-2009. 2. In this appeal, Revenue raised the following grounds which read as under: 1 (i) On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in holding that the figures of opening and closing stock cannot be considered for worki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITD 169) as well as the ITAT, Mumbai decision in the case of M/s. American Express Bank Limited in ITA No. 5904 6022/Mum/2000 which otherwise, supports the revenue. In this regard, Ld Counsel filed a copy of the decision in the case of M/s. India Advantage Securities Ltd. vide ITA No.6711/M/2011 (AY: 2008-2009) dated 14.9.2012 (para 5) and another decision of the ITAT, Mumbai Bench in the case of Esquire Private Limited vide ITA No.5688/Mum/2011 (AY: 2008-2009) dated 29.8.2012 (para 14 to 16 are relevant), on identical facts, the issue was decided in favour of the assessee and Dr Shivaram read out the said paragraphs. 4. On the other hand, Ld DR relied on the order of the Revenue Authorities. Further, as per Ld DR, request for not invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ltd. (supra). We have considered the principle of judicial hierarchy. We have also perused para 5 and 6 of the decision of the Tribunal in the case of M/s. India Advantage Securities Ltd (supra) which considered the said judgment of Honble High Court of Karnataka for deciding the issue in favour of the assessee. Considering the settled nature of the issue and the importance of the said decision of the Tribunal, relevant paragraphs are reproduced as under: 5. We have perused the records and considered the rival contentions carefully. The dispute is regarding the disallowance of expenses u/s 14A in relation to the exempt dividend income received from shares held on trading account . The AO disallowed the expenses holding that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck-intrade . These observations were only obiter dicta and not the ratio decidendi of the judgment. The ratio decidendi of the judgment was disallowance of interest u/s 14A which had been upheld by the Tribunal. The Tribunal, therefore, did not accept the arguments based on the judgment of Hon ble High Court of Kerala in the case of Smt. Leena Ramachandran (supra) which was not directly on the issue of disallowance of expenses in relation to the dividend income received from trading in shares. 6. However, the Hon ble High Court of Karnataka have recently considered the disallowance of expenses incurred on borrowings made for purchase of trading shares u/s 14A of the IT Act in the case of CCL Ltd. vs. JCIT (supra). The assessee in that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares. 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 decision of the Special Bench of the Tribunal in the case of M/s. Daga Capital Management Pvt. Ltd. (supra). In fact, we note that the Tribunal in the case of Ganjam Treading Co. Ltd. (surpa) has already considered this situation and held that in view of the judgment of Hon ble High Court of Karnataka in the case of CCL Ltd. vs. JCIT (supra) the disallowance of interest in relation to the dividend received from trading shares cannot be made. We, therefore, see no infirmity in the order of the ld CIT (A) in deleting the disallowance u/s 14A computed by the AO in relation to the stock-in-trade. The order of the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the opening and closing balance of investment which was required to be considered for working the disallowance. The appellant s average value of investment during the year was only at ₹ 35,000/- only, the indirect expenditure disallowance as per clause (ii) of Rule 8D(2) was working out at ₹ 3240/- only. Consequently, the O.5% of average value of investment of ₹ 35,000/- was working out to ₹ 2000/- only. In the facts and circumstances, the disallowance as per formula provided in Rule 8D was required to be worked out as under:- (i) Direct interest expenditure Rs. Nil (ii) Indirect interest expenditure ₹ 340/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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