Where shares are held as stock-in-trade no part of interest on borrowed funds can be disallowed u/s 14A as incurred in relation to Dividend income

Yatish Trading Co.P ltd. Vs ACIT (ITAT Mumbai), ITA No. 456 /Mum/2009, (Assessment Year: 2004 -05) Summary of Findings:- In the case of a trader where shares are held as stock-in-trade no part of interest on borrowed funds can be disallowed u/s 14A as incurred in relation to Dividend income. The interest on borrowed funds used for trading activity is an allowable expenditure under section 36(1)(iii) and the same cannot be treated as the expenditure for earning the dividend income which is incidental to the trading activity. If the real purpose was to use borrowed funds for trading purposes and...