TMI Blog2013 (1) TMI 1015X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 2,74,121,593/- in respect of personal investment and dividend of ₹ 34,73,101/- in respect of trading shares and interest income of ₹ 2,09,73,875/- from relief bonds which were exempt from tax. The AO during the assessment asked the assessee to explain as to how expenses relating to such income should not be allowed under section 14A of the Act. The assessee submitted that it was maintaining separate accounts in respect of trading business and personal investment for which separate balance sheets had been prepared. The personal investments were made out of the profit earned in the past and not from borrowings. It was argued that in respect of dividend income received from trading shares, the provisions of section 14A w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re computed at .5% of average investments which came to ₹ 71,58,567/-. The AO thus made total disallowance of ₹ 1,19,69,218/-. 3. The assessee disputed the decision of AO and submitted before CIT(A) that the assessee had maintained separate accounts including separate bank accounts for personal investments and trading activities and separate balance sheets had also been prepared which had been filed before the AO. The personal investments were made from own funds as there were no loans shown in the personal balance sheet. The assessee also gave separate details of dividend earned from two activities. It was, therefore, submitted that there was no question of any disallowance in respect of personal investments as no expenses w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares was required to be made both in relation to interest and other expenses. As regards personal investments, CIT(A) accepted the claim of the assessee that tax free investments such as RBI relief bonds had been made in the earlier years which required no administrative expenses. Similarly investments in shares were from the unlisted group companies which have held for retaining control over these companies. Therefore, these also did not require any administrative expenses. The other investments were LIC investments which were also made in earlier years requiring no day to day expenditure. CIT(A) also observed that the assessee himself was handling day to day matters as he was having wide experience in the field and there was no need for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ITA No.6711/mum/2011 for assessment year 2008-09 in which the Tribunal held that in view of the judgment of Hon'ble High Court of Karnataka in the case of CCI (supra) which was directly on the point, the decision of the Special Bench of the Tribunal in the case of Daga Capital Management (supra), could not be followed and accordingly the claim of the assessee in respect of trading shares was accepted. The ld. DR on the other hand placed reliance on the order of AO. 5. We have perused the records and considered the rival contentions carefully. The dispute raised in these appeals is regarding disallowance of expenses under section 14A in relation to exempt income. The assessee has received exempt income in the form of dividend from p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) in relation to deleting disallowance of expenses in relation to personal investment is reasonable and upheld. 5.1 CIT(A) has however disallowed expenses relating to trading activity as per Rule 8D. No doubt, it is true that Rule 8D was applicable for the relevant assessment year. However, the issue is whether the disallowance of any expenses can be made under Section 14A in relation to trading in shares. The department has placed reliance on the decision of the Special Bench of the Tribunal in the case of Daga Capital Management Pvt. Ltd. (supra), in which it has been held that section 14A would apply even to the dividend income for trading in shares. However, subsequently the Hon'ble High Court of Karnataka in the case of CCI Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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