Sivan Securities (P) Ltd. v. DCIT

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The Tax Publishers2019 TaxPub(DT) 4663 (Bang-Trib)

INCOME TAX ACT, 1961

Secton 14A

If expenditure was incurred on earning dividend income, then that much of the expenditure which was attributable to dividend income had to be disallowed and could not be treated as business expenditure as per section 14A, however, such disallowance could not exceed the exempt income.

Disallowance under section 14A - Expenditure against exempt income - Disallowance in excess of tax free income -

Assessee earned tax free dividend income on investments in shares but claimed no disallowance under section 14A. AO worked out disallowance in excess of tax free income earned by assessee. Assessee submitted that dividend income was earned in respect of those shares which were held by assessee in course of business and not as investment. Held: If expenditure was incurred on earning dividend income, then that much of the expenditure which was attributable to dividend income had to be disallowed and could not be treated as business expenditure as per section 14A, however, such disallowance could not exceed the exempt income. AO was directed accordingly.

Followed:Maxopp Investment v. CIT (2018) 402 ITR 640 (SC) : 2018 TaxPub(DT) 1403 (SC) and Way2wealth Securities (P) Ltd. v. DCIT in ITA No. 1679/Bang/2017 dt. 1-6-2018.

REFERRED : Jt. Investments (P) Ltd. v. CIT (2015) 372 ITR 694 (Del) : 2015 TaxPub(DT) 1375 (Del-HC), CIT v. Holcim India Pvt. Ltd. 272 CTR 282 (Del) in addition to the tribunal order of Mumbai Bench rendered in the case of Future Corporate Resources Ltd. v. Asstt. CIT ITA No. 4658/Mum/2015 dt. 26-7-2017 : 2017 TaxPub(DT) 4273 (Mum-Trib) and Future Corporate Resources Ltd. v. ACIT in ITA No. 4658/Mum/2015 dt. 26-7-2017 : 2017 TaxPub(DT) 4273 (Mum-Trib).

FAVOUR : Partly in assessee's favour.

A.Y. :

INCOME TAX ACT, 1961

Section 37(1)