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December 14, 2012 (Date of publication) |
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S. 14A does not apply to shares held as stock-in-trade
The assessee received Rs. 59 lakhs as tax-free dividend. It claimed that no disallowance u/s 14A could be made as it was a dealer in shares and the shares were held as stock-in-trade. The AO & CIT(A) relied on Daga Capital Management Services 119 TTJ (SB) 289 (Mum) where it was held that s. 14A applied also to shares held as stock-in-trade and made a disallowance of Rs. 37 lakhs. On appeal by the assessee to the Tribunal, HELD allowing the appeal:
As the assessee is engaged in the business of dealing in shares and the shares were held as stock-in-trade, the intention of the assessee was not to earn dividend income. As the dividend received was incidental to the business of sale of shares, no notional expenditure could be disallowed by invoking s. 14A (CCI Ltd 71 DTR 141 (Kar) & Apoorva Patni (ITAT Pune) (included in file) followed
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