Whether rule 8D(ii) & 8D(iii) applies to shares held as stock-in-trade and loss arising out of derivatives from the income arising out of buying and selling of shares?

Last updated: 05 November 2014

Court :
ITAT Kolkata

Brief :
Assessee is engaged in the business of trading in shares on self-account, derivative transactions and share broking activity with main intention to earn business profits. According to AO, there is no material difference or any deviation in the nature of business carried on by the assessee during the year vis-a-vis preceding years. Assessee earned dividend Rs. 28,77,678/- on shares held as stock-in-trade which was incidental to holding of shares for that particular period within which dividend was declared. It was noticed by CIT(A) as well asDCITthat the balance sheet of the assessee did not show any investment and all the shares were being held as stock in trade only. The AO had calculated the disallowance on the stock in trade/inventories held by the assessee. It was held that a plain reading of Rule 8D(2)(ii) and (iii) can only be applied, in the situations, wherever share are held as an investment and this rule will not have any application when the shares are held as stock in trade.

Citation :
Deputy Commissioner of Income-tax – Appellant – Versus - M/s. Baljit Securities Private Limited - Respondent