Rule 8D is invoked by assessing officer for computing disallowance u/s Section 14A of the Income Tax Act even in case shares are held as Stock-in-Trade.Thus , the agony of the taxpayers who deals in shares only and does not involves in investment aggravates , because in most of cases the dividend received are far less than the expense likely to be disallowed as result of application of Rule 8D...
In the continuing saga of disallowance u/s 14A and for the purpose of computation of disallowable amount under Rule 8D of Income Tax Rule, two recent judgments- one from Kolkata ITAT and another from Mumbai ITAT- are welcome relief for many tax payers specially those who have to bear the burnt of disallowance under section 14A despite the fact that they primerly deal in shares . Relief from Disallowance u/s...
Over zealous tax authorities have many time blindly applied Rule 8D read with provision under section 14A to disallow expenditure more than actual claim by the assessee. This create a bizarre situation where the tax department is disallowing an expense , for which assessee dis not claim any allowance. Gillette Group India (P.) Ltd. vs ACIT 12(1), New Delhi 16 ITR(TRIB.) 57 (DELHI)/ is one such case. Section 14A disallowance: Facts of the Case The case
The assessee a dealer in shares and securities earned dividend income from shares. The assessee claimed expenditure on brokerage of arranging interest free loan which was for payment of conversion cost of its stock of partly paid shares into fully paid shares. The Assessing Officer disallowed this amount on the ground that it was spent for earning exempt income. On appeal, while the Commissioner (Appeals) confirmed the order of the
Section 14A of the I T. Act is regarding disallowance of expenditure incurred on the income which is exempt from tax . The bone of contention between taxpayer and income tax department is mainly on the issue of expense on earning of dividend income . While the assessee claims that no expenditure was incurred for earning tax free dividend income, whereas the Assessing Officer apportion the total expense debited in P & L account in the proportion of total income . The government later on notified the Rule 8D for computation of such disallowance u/s 14A
Very recent judgment of Supreme Court in CIT vs Reliance Petroproducts Pvt Ltd delivered on 17/3/2010, is a great relief to taxpayers as it has cleared the confusion in minds of Authorities regarding the imposistion of penalty. In fact the decision of Apex Court in Dharmendra Textile embolden Authorities to the extent that penalty proceeding