| COURT: | ITAT Delhi |
| CORAM: | G. D. Agrawal (P), K. Narasimha Chary (JM) |
| SECTION(S): | 14A, Rule 8D |
| GENRE: | Domestic Tax |
| CATCH WORDS: | Disallowance u/s 14A & Rule 8D |
| COUNSEL: | Jyoti Narula |
| DATE: | November 19, 2018 (Date of pronouncement) |
| DATE: | May 4, 2019 (Date of publication) |
| AY: | 2008-09 |
| FILE: | Click here to view full post with file download link |
| CITATION: | |
| S. 14A Rule 8D disallowance of shares held as stock-in-trade: Though Maxopp Investment 402 ITR 640 (SC) rejects the theory of dominant purpose in making investment, it makes a clear distinction between dividend earned on shares acquired for controlling interest & shares purchased as stock-in-trade. In the case of the latter, it is only by a quirk of fate that the shares were held by the assessee when the dividend was declared. Accordingly, s. 14A & Rule 8D do not apply to shares held as stock-in-trade | |
Hon’ble Apex Court, therefore, while rejecting the theory of dominant purpose in making investment in shares-whether it was to acquire and retain controlling interest in the other company or to make profits out of the trading activity in such shares – clearly made a clear distinction between the dividend earned in respect of the shares which were acquired by the assessee in their exercise to acquire and retain the controlling interest in the investee company, and the shares that were purchased for the purpose of liquidating those shares whenever the share price goes up, in order to earn profits. It is, therefore, clear that though not the dominant purpose of acquiring the shares is a relevant for the purpose of invoking the provisions under section 14 A of the Act, the shares held as stock in trade stand on a different pedestal in relation to the shares that were acquired with an intention to acquire and retain the controlling interest in the investee company
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