Income Tax Act, 1961

Section 14A Rule 8D

Disallowance under section 14A - Expenditure against exempt income - Whether shares held as stock-in-trade would be considered for purpose of computing disallowance -

Assessee-firm was engaged in business of trading in shares and securities. AO observed that the assessee earned exempt dividend income during the year but had not attributed any expenditure for earning of the said exempt income. Assessee submitted that as it was into trading of shares and securities, therefore, the provisions of section 14A were not applicable in its case. However, without prejudice to the said claim of the assessee, the AO made disallowance under section 14A read with rule 8D(2)(iii). Further, CIT (A) also sustained the said disallowance as made by the AO. Held: It is settled position that shares held as stock-in-trade would be considered for purpose of computing disallowance under section 14A. In other words, earning of exempt dividend income on shares held as stock-in-trade would trigger the applicability of section 14A. Therefore, the CIT(A) was justified in sustaining the disallowance made by AO under section 14A read with rule 8D(2)(iii).

Relied:Maxopp Investment Ltd. & Ors. v. CIT & Anr. (2018) 402 ITR 640 (SC): 2018 TaxPub(DT) 1403 (SC) Distinguished:CIT v. Alpha G. Corp development Ltd. [ITA No. 599/2018, dt. 25-4-2019]: 2019 TaxPub(DT) 4294 (Del-HC) Nice Bombay Transport Pvt. Ltd. v. ACIT (OSD) (2019) 175 ITD 684 (Del): 2019 TaxPub(DT) 2096 (Del-Trib) Vora Financial Services Pvt. Ltd. v. ACIT [ITA No. 532/Mum/2018, dt. 29-6-2018]: 2018 TaxPub(DT) 4132 (Mum-Trib)

REFERRED :

FAVOUR : Against the assessee

A.Y. : 2014-15

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