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TMI Blog2012 (3) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of Rs. 24,34,301/- and after considering the assessee's explanation, he disallowed the amount of Rs. 2,14,242/- on the ratio of exempt income by total income vis-à-vis expenditure of Rs. 4.43 crores. A disallowance under section 14A was accordingly made of Rs. 2,14,242/-. 3. On noticing that Assessing Officer has not correctly made the disallowance and not based on proper analysis and appreciation of the facts resulting in lower disallowance and under assessment of income, the CIT issued notice under section 263 and asked the assessee to explain. After considering the explanation of the assessee the CIT adopted his own method and directed the Assessing Officer to disallow an amount of Rs. 1.0353 crore and recompute the total inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason that the assessee had (a) own funds and there are no borrowals during the year and (b) that the assessee had both investment in shares as well as trading shares and that the assessee had offered short term capital gain on sale of investment shares which was also taxed. c) assessee had trading in shares which accepted as business income. d) out of the dividend income of Rs. 24,34,301/- dividend income of Rs. 23,03,783/- was received in respect of shares held as stock in trade and only an amount of Rs. 1,30,518/- was received in respect of shares held as investment e) and that no disallowance under section 14A was to be made in respect of shares held in stock in trade as the dividend received was incidental to the business and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sted in shares and the CIT has given an opportunity to the assessee and accordingly enhanced the disallowance. He further referred to Rule 8D and submitted that there are 3 aspects of Rule 8D and the CIT has considered only one aspect and gone by the investment and not by the total income. The submission was that CIT has not followed Rule 8D and since the assessee had investments which earned exempt income, the interest paid by the assessee was to be disallowed under Rule 14A. He justified the action of CIT and in support relied on various case law. 6. We have considered the issue and examined the record and rival contentions. Without going into various propositions raised on legal principles, we are of the opinion that the order of the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve to examine this part of 'erroneous' nature of the order at all considering that there is no prejudice caused to the Revenue by order of the assessment under section 143(3). 8. The Assessing Officer had determined the business income at Rs. 14.76 crores and allowed carry forward of losses to be set of thereby determining the business income at Nil. The short term capital gain of Rs. 5.76 crores was to be taxed at 10%. The assessee also had suffered tax on book profit under section 115JB and the Assessing Officer determined the total book profit at Rs. 45.53 crores on which the tax payable at Rs. 7.50 crores worked out at Rs. 3.41 crores. The Assessing Officer had given a finding that the tax payable on book profit is more than the tax pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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