{"id":4665,"date":"2012-04-06T07:40:00","date_gmt":"2012-04-06T07:40:00","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=4665"},"modified":"2012-04-06T07:40:00","modified_gmt":"2012-04-06T07:40:00","slug":"cci-ltd-vs-jcit-karnataka-high-court-s-14a-does-no-apply-to-shares-held-as-stock-in-trade-disallowance-on-notional-basis-is-invalid","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/cci-ltd-vs-jcit-karnataka-high-court-s-14a-does-no-apply-to-shares-held-as-stock-in-trade-disallowance-on-notional-basis-is-invalid\/","title":{"rendered":"CCI Ltd vs. JCIT (Karnataka High Court)"},"content":{"rendered":"\n\n
Click here to download the judgement (cci_14A_stock_shares_notional.pdf) <\/strong> <\/a><\/p><\/td>\n<\/tr>\n<\/table>\n


\nS. 14A does no apply to shares held as stock-in-trade. Disallowance on notional basis is invalid
\n<\/strong><\/p>\n

The assessee availed of an interest-free loan of Rs.14 crores and paid brokerage of Rs.28 lakhs for purchasing shares. The shares were held as stock-in-trade<\/em> and the assessee earned dividend of Rs. 46.67 lakhs thereon. The assessee claimed that no expenditure had been incurred to earn the dividend though the AO made a disallowance of Rs. 27.34 lakhs u\/s 14A & Rule 8D. The Tribunal held that the brokerage on the loan, though incidental to the trading of shares, was indirectly incurred to earn dividend<\/em> and had to be disallowed u\/s 14A. On appeal by the assessee, HELD by the High Court allowing the appeal:<\/p>\n

When no expenditure is incurred by the assessee in earning dividend income, notional expenditure<\/strong> cannot be disallowed u\/s 14A. The assessee had not retained shares with the intention of earning dividend. The dividend income was incidental to the business of sale of shares, which remained unsold by the assessee<\/strong>. It cannot be said that the expenditure incurred in acquiring the shares had to be apportioned to the extent of dividend income and that should be a disallowance u\/s 14A.<\/p><\/blockquote>\n

\nSee also Yatish Trading vs. ACIT<\/a><\/strong> 129 ITD 237 (Mum) on non-applicability of s. 14A to trading shares\n<\/div>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

When no expenditure is incurred by the assessee in earning dividend income, no notional expenditure<\/strong> can be disallowed u\/s 14A. The assessee had not retained shares with the intention of earning dividend. The dividend income was incidental to the business of sale of shares, which remained unsold by the assessee<\/strong>. It cannot be said that the expenditure incurred in acquiring the shares had to be apportioned to the extent of dividend income and that should be a disallowance u\/s 14A.<\/p>\n

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