TMI Blog2018 (3) TMI 1352X X X X Extracts X X X X X X X X Extracts X X X X ..... arranted in terms of section 14A which is brought in the statute book with retrospective effect from 1.4.1962. Disallowance had to be made only on an estimated basis with regard to the expenditure incurred for the purpose of earning tax free income. We direct the ld AO to disallow 1% of exempt income under this issue and accordingly, the Ground No. 1 raised by the assessee is partly allowed. Addition made u/s 94(7) - AO observed that the assessee had reported short term capital loss in respect of sale of shares of SAIL among other scrips - Held that:- We find that the assessee had neither purchased before three months from the record date the shares of SAIL nor sold the same within three months after the record date. Hence we hold that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .9.2008 and also as per the order sheet entires, which were duly complied with by the assessee. The ld AO observed that the assessee had earned dividend income of ₹ 9,44,243/- and Long Term Capital Gain of ₹ 17,45,330- which have been claimed as exempt u/s 10(34) and 10(38) of the Act in the return of income. The assessee stated that no expenditure was incurred for earning such exempt income. The ld AO found that the assessee had debited interest in its profit and loss account a sum of ₹ 91,233/- and also observed that the investments were made out of borrowed funds by the assessee. Accordingly he disallowed the entire interest paid in the sum of ₹ 91,233/- as direct expenditure incurred for the purpose of earning ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rule 8D was not in force and the same was made applicable only from Asst Year 2008-09 as decided in the decision of Godrej Boyce Manufacturing. However, it is not in dispute that the assessee had derived taxable income as well as tax free income and incurred expenditure for deriving both the incomes and hence disallowance is definitely warranted in terms of section 14A which is brought in the statute book with retrospective effect from 1.4.1962. The disallowance had to be made only on an estimated basis with regard to the expenditure incurred for the purpose of earning tax free income. The Hon ble Jurisdictional High Court in the case of CIT vs M/s R.R.Sen Brothers P Ltd in GA No. 3019 of 2012 in ITAT NO. 243 of 2012 dated 4.1.2013 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 006 NTPC Ltd on 13826 shares @ 2 per share 27,652 9,44,243 The assessee furnished the details of short term capital gains for the period 1.4.2005 to 31.3.2006 in respect of each scrip containing the purchase details with date of purchase, quantity, rate and value ; sales details with date of sale, quantity , rate and value ; short term capital gains / losses derived in each scrip. From the said workings, the ld AO observed that the assessee had reported short term capital loss in respect of sale of shares of SAIL among other scrips. The assessee had derived dividend income which is exempt in the sum of ₹ 8,10,000/- fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk Ltd - ₹ 2,24,267.85 SAIL - ₹ 7,52,669.90 UCO Bank Ltd - ₹ 84,805.22 UCO Bank Ltd - ₹ 34,732.66 UCO Bank Ltd - ₹ 1,69,245.93 Lanco Industries Ltd - ₹ 2,37,964.72 Lanco Industries Ltd - ₹ 1,63,974.03 Lanco Industries Ltd - ₹ 1,11,216.23 Lanco Industries Ltd - ₹ 1,74,073.76 Out of the short term capital loss cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SALE DETAILS 28.1.2005 150000 shares 20.12.2005 150000 shares 1.4.2005 110000 shares 21.12.2005 110000 shares 1.4.2005 90000 shares 22.12.2005 90000 shares We find that the assessee had neither purchased before three months from the record date the shares of SAIL nor sold the same within three months after the record date. Hence we hold that the transactions carried out by the assessee would be outside the ambit of provisions of section 94(7) of the Act. Hence we hold tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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