Tuesday 4 September 2012

S. 14A does not apply to dividend on shares held for trading purposes

Esquire Pvt. Ltd vs. DCIT (ITAT Mumbai)

If the dividend income is incidental to trading activity, following the principles laid down in CCI Ltd vs. JCIT 206 Taxman 563 (Kar), expenditure incurred in acquiring shares cannot be apportioned to the dividend for making disallowance u/s 14A. As held in CIT vs. Smt. Leena Chandran 339 ITR 296 (Ker) interest paid on funds borrowed for acquisition of shares in the form of investment would only attract disallowance under section 14A {see also Yatish Trading 129 ITD 237 ; Contra: American Express }

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