Oasis Securities Ltd. v. Dy. CIT

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The Tax Publishers2013 TaxPub(DT) 1552 (Mum-Trib) : (2013) 154 TTJ 0017 : (2013) 059 SOT 0302 Income Tax Act, 1961 --Disallowance under section 14A--Expenditure against exempt income Disallowance of interest in relation to dividend received from trading of shares --Assessee-company engaged in the activity of stock broking and providing financial services had borrowed money which was invested in IPO considered as stock-in-trade. It claimed tax-free dividend income as exempt and stated that no expenditure had been incurred to earn the same. Assessing officer did not agree with assessee's contention and calculated the expenditure under rule 8D of Income Tax Rules and disallowed the same under section 14A. Commissioner (Appeals) held that the payment of interest was the expenditure on the loans taken by the assessee for investment in shares. *Held:* Was not justified as the profit/loss on the said allotment of shares to the assessee had rightly been assessed under the head 'Business income' of the assessee. Therefore, the borrowed money, which was utilized in investment in IPO, was considered as stock-in-trade. Mores so, the assessee had not retained the shares with the intention of earning dividend income and it was incidental to his business of sale of shares which remained unsold with the assessee. Thus, the disallowance of interest in relation to dividend received from trading of shares could not be made. But in respect of investment in shares, some administrative expenses had been incurred by the assessee for which disallowance had to be made. Therefore, the disallowance to 25 per cent of the dividend income was made. Income Tax Act, 1961, Section 14A Income Tax Act, 1961 --Head of income--Business income or income from other sources Interest on fixed deposits lying with bank to obtain bank guarantee--Assessee had earned bank interest on account of 50 per cent of margin money given in the form of fixed deposits to obtain bank guarantee in favour of National Stock Exchange (NSE) so that assessee could have trading limits in the cash market segments of the Exchange. It assessed the same under the head income from business. Commissioner (Appeals), however, assessed interest earned on fixed deposits as 'income from other sources'. *Held:* Not rightly so, as considering that assessee was in the business of stock broking, the said interest income on fixed deposits was connected with the business of the assessee. Moreover, the Department has not disputed that such interest income had been considered in preceding assessment years as well as in subsequent assessment years to the assessment year under consideration as business income. Therefore, such income has rightly been considered by assessing officer as income from business. Income Tax Act, 1961, Section 14 Income Tax Act, 1961, Section 28(i) Income Tax Act, 1961, Section 56 IN THE ITAT, Mumbai C Bench B.R. Mittal, J.M. & N.K. Billaiya, A.M. Oasis Securities Ltd. v. Deputy CIT ITA No. 8009/Mum/2011 SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 1552 (Mum-Trib) : (2013) 154 TTJ 0017 : (2013) 059 SOT 0302

Income Tax Act, 1961

--Disallowance under section 14A--Expenditure against exempt income Disallowance of interest in relation to dividend received from trading of shares --Assessee-company engaged in the activity of stock broking and providing financial services had borrowed money which was invested in IPO considered as stock-in-trade. It claimed tax-free dividend income as exempt and stated that no expenditure had been incurred to earn the same. Assessing officer did not agree with assessee's contention and calculated the expenditure under rule 8D of Income Tax Rules and disallowed the same under section 14A. Commissioner (Appeals) held that the payment of interest was the expenditure on the loans taken by the assessee for investment in shares. Held: Was not justified as the profit/loss on the said allotment of shares to the assessee had rightly been assessed under the head 'Business income' of the assessee. Therefore, the borrowed money, which was utilized in investment in IPO, was considered as stock-in-trade. Mores so, the assessee had not retained the shares with the intention of earning dividend income and it was incidental to his business of sale of shares which remained unsold with the assessee. Thus, the disallowance of interest in relation to dividend received from trading of shares could not be made. But in respect of investment in shares, some administrative expenses had been incurred by the assessee for which disallowance had to be made. Therefore, the disallowance to 25 per cent of the dividend income was made.

Income Tax Act, 1961, Section 14A

Income Tax Act, 1961

--Head of income--Business income or income from other sources Interest on fixed deposits lying with bank to obtain bank guarantee--Assessee had earned bank interest on account of 50 per cent of margin money given in the form of fixed deposits to obtain bank guarantee in favour of National Stock Exchange (NSE) so that assessee could have trading limits in the cash market segments of the Exchange. It assessed the same under the head income from business. Commissioner (Appeals), however, assessed interest earned on fixed deposits as 'income from other sources'. Held: Not rightly so, as considering that assessee was in the business of stock broking, the said interest income on fixed deposits was connected with the business of the assessee. Moreover, the Department has not disputed that such interest income had been considered in preceding assessment years as well as in subsequent assessment years to the assessment year under consideration as business income. Therefore, such income has rightly been considered by assessing officer as income from business.

Income Tax Act, 1961, Section 14

Income Tax Act, 1961, Section 28(i)

Income Tax Act, 1961, Section 56

IN THE ITAT, Mumbai C Bench

B.R. Mittal, J.M. & N.K. Billaiya, A.M.

Oasis Securities Ltd. v. Deputy CIT

ITA No. 8009/Mum/2011