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ITAT view that s. 14A applies to shares held as stock-in-trade cannot be followed
The assessee claimed, relying on Leena Ramachandran 339 ITR 296 (Ker) & CCL Ltd 250 CTR 291 (Kar), that as the shares were held as stock-in-trade, s. 14A did not apply. The department opposed this plea by relying on American Express Bank where the view was taken, after considering Leela Ramchandran & Daga Capital Management 117 ITD 169 (Mum) (SB), that s. 14A applied even to a trader in shares. HELD by the Tribunal:
Though in American Express Bank, the Tribunal followed Daga Capital Management 117 ITD 169 & distinguished Leena Ramachandran 339 ITR 296 (Ker) & held that s. 14A applies also to a trader in shares, the Karnataka High Court has held in CCL Ltd 250 CTR 291 that disallowance of expenses incurred on borrowings made for purchase of trading shares cannot be made u/s.14A. As this is a direct judgment of a High Court on the issue, the same has to be followed in preference to the decision of the Special Bench of the Tribunal in Daga Capital Management (or that in American Express Bank) & it has to be held that disallowance of interest in relation to the dividend received from trading shares cannot be made (Ganjam Trading Co (included in file) & Yatish Trading Co 129 ITD 237 followed).
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