Court held that ; The argument that S. 14A & Rule 8D will not apply if the “dominant intention” of the assessee was not to earn dividends but to gain control of the company or to hold as stock-in-trade is not acceptable. S. 14A applies irrespective of whether the shares are held to gain control or as stock-in-trade. However, where the shares are held as stock-in-trade, the expenditure incurred for earning business profits will have to be apportioned and allowed as a deduction. Only that expenditure which is “in relation to” earning dividends can be disallowed u/s 14A & Rule 8D. The AO has to record proper satisfaction on why the claim of the assessee as to the quantum of suo moto disallowance is not correct. .( CA. No. 104-109 of 2015, dt. 12.02.2018)( AY. 2002-03, 2008 -09, 2009 -10)
Maxopp Investment Ltd. v. CIT ( 2018) 402 ITR 640/ 164 DTR 1 /254 Taxman 325 (SC) PCIT v. State Bank of Patiala ( 2018) 402 ITR 640/ 164 DTR 1/254 Taxman 325 (SC) Editorial: Maxopp Investment Ltd v CIT ( 2012) 347 ITR 272 ( Delhi) (HC) is affirmed , Decision of special Bench in ITO v. Daga Capital Management ( 2009) 312 ITR (AT) 1 ( Mum) (SB) is referred
S. 14A : Disallowance of expenditure – Exempt income – Stock in trade – Controlling interest – Principle of apportionment-Only that expenditure which is “in relation to” earning dividends can be disallowed- AO has to record proper satisfaction on why the claim of the assessee as to the quantum of suo moto disallowance is not correct . [ R.8D ]