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Commissioner of Income Tax, Kolkata Versus M/s. GKK Capital Markets (P) Limited

2017 (2) TMI 628 - CALCUTTA HIGH COURT

Disallowance under Section 14A - Held that:- Tribunal had accepted the submission of the assessee that there was no satisfaction recorded by the Assessing Officer for invoking the provisions of Section 14A read with Rule 8D. - In Dhanuka & Sons (2011 (4) TMI 861 - CALCUTTA HIGH COURT ) it was found there was no dispute that part of the income of the assessee from its business was from dividend whereas the assessee was unable to produce any material before the authority below showing the sou .....

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allow the claim itself treating the said amount as business income to thereafter disallow the offered expenditure. - In view of the clear finding of fact regarding the exempt income claimed treated to be business income and the shares held by the assessee having been treated as stock in trade, we do not find the case involves a substantial question of law. - Decided against revenue - G. A No. 1150 of 2015, ITAT No. 52 of 2015 - Dated:- 10-2-2017 - Aniruddha Bose And Arindam Sinha, JJ. Ms. G .....

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empt income. Applying Rule 8D the Assessing Officer had computed disallowance under Section 14A the Income Tax Act, 1961 but the Tribunal had erred in law in deleting this disallowance. She handed up a calculation sheet detailing the manner in which calculation is made of disallowable expenditure by application of Rule 8D (i), (ii) and (iii). The sheet also contains such calculation made in respect of the assessee. That portion of the calculation is reproduced below: Re - G K K Capital Markets ( .....

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half of the revenue, has, on the other hand, supported the order passed by the Tribunal and has contended that the assessee itself having failed to produce material in support of its contention, the Assessing Officer rightly assessed the deductible income on proportionate basis. Mr. sarkar submits that the same is in conformity with Rule 8D of the Income tax Rule and thus, we should not interfere with the order passed by the Tribunal. 7. After hearing the learned counsel appearing for the partie .....

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rned from the business is exempt from tax, section 14A of the Act was enacted to overcome those judicial pronouncements. The object of section 14A of the Act is to disallow the direct and indirect expenditure incurred in relation to income which does not form part of the total income. 8. In the case before us, there is no dispute that part of the income of the assessee from its business is from dividend which is exempt from tax whereas the assessee was unable to produce any material before the a .....

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d ones and not acquired recently is immaterial. It is for the assessee to show the source of acquisition of those shares by production of materials that those were acquired from the funds available in the hands of the assessee at the relevant point of time without taking benefit of any loan. If those shares were purchased from the amount taken in loan, even for instance, five or ten years ago, it is for the assessee to show by the production of documentary evidence that such loaned amount had al .....

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ssessing authority took a most reasonable approach in assessment. She also relied on CBDT Circular no.5/2014 dated 11th February, 2014, in particular to paragraphs 4 and 6 therein which are set out below: 4. The above position is further clarified by the usage of term includible in the Heading to section 14A of the Act and also the Heading to Rule-8D of I.T. Rules, 1962 which indicates that it is not necessary that exempt income should necessarily be included in a particular year s income, for d .....

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or disallowance of the expenditure even where taxpayer in a particular year has not earned any exempt income. The questions suggested by the Revenue are as follows:- i) Whether on the facts and in the circumstances of the case the Learned Tribunal erred in law and was not justified in allowing the appeal filed by assessee in deleting the disallowance under Section 14A computed in accordance with Rule 8D of the Income Tax Act, 1961. ii) Whether on the facts and in the circumstances of the case th .....

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the investment in any particular period? iv) The order impugned is liable to be set aside as the same is passed against the applicable law and without appreciation of facts. v) Whether on the facts and in the circumstances of the case the Learned Tribunal erred in law as it allowed the appeal filed by assessee and there is perversity for non consideration of materials facts on record transpired after the detailed enquiry made by Assessing Officer and the same ought to be set aside? Mr. Khaitan, .....

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ture of interest on borrowings was relatable to the share trading business. The shares had been taken as stock in trade of the assessee which yielded dividend income. There was no expenditure incurred in earning the dividend income which is only incidental to the assessee holding on to the shares. He relied on an unreported judgment dated 28th February, 2012 of the High Court of Karnataka in the case of CCI Ltd. vs. JCIT in which the substantial question of law that arose was whether the provisi .....

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iture of ₹ 37,28,966/- disallowed as per Rule 8D on account of dividend income. Since no other exempt income had been allowed by the Assessing Officer, disallowance of further expenditure as concurrently deleted by the CIT and the Tribunal was incorrectly done since Section 14A had no application to the rest of the share trading income of the assessee, the same having been treated as business income. He submitted further, in any event the Assessing Officer did not record reasons to show th .....

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