BOMBAY REAL ESTATE DEVELOPMENT COMPANY PRIVATE LIMITED,MUMBAI vs. OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1(1)(1), MUMBAI

This appeal is filed by Bombay real estate development Co Ltd (the assessee/appellant) for assessment year 2017 – 18 against the appellate order passed by National faceless appeal Centre and NFAC, Delhi (the learned CIT – A) wherein appeal filed by the assessee against the assessment order dated 16/12/2019 passed under section 143 (3) of the act by the assistant Commissioner of income tax Circle 1 (1) (1), Mumbai making a disallowance of ₹ 1,362,076/– under section 14 A read with rule 8D of

The assessee is aggrieved and is in appeal before us contesting the confirmation of disallowance under section 14 A of the act of ₹ 1,362,076/–.

The brief facts of the case show that assessee is a company engaged in the business of real estate development. It filed its return of income declaring a total loss of Rs 67,16,041/– on 29/10/2017. The return was picked up for complete scrutiny. Notice under section 143 (2) was issued on 17/8/2018.

The learned AO found that assessee has claimed dividend income of ₹ 1,269,909/– as exempt income and did not disallow any sum under section 14 A of the act. Even did not make disallowance of securities transaction tax of ₹ 778/–. The assessee was asked that why section 14 A read with rule 8D should not be applied. The claim of the assessee is that assessee has not incurred any expenditure in relation to earning dividend income as the investment on surplus funding mutual funds was entrusted to Kotak Mahindra bank cosmol financial solutions Ltd who are managing the investment in income was earned without making any effort. The learned assessing officer rejected the explanation of the assessee. He recorded the satisfaction that assessee has made investment in equity and mutual fund and therefore control of investment as well as purchase and sale of those funds the assessee has

Aggrieved, assessee preferred an appeal before the learned CIT – A holding that the decision of the coordinate bench in assessee’s case for assessment year 2010 – 11 does not apply during the year and therefore he confirmed disallowance. Therefore, assessee is in appeal before us.

The assessee has submitted a paper book containing nine pages wherein the only contention raised by the assessee is that the disallowance should be restricted to the investments, which has resulted into an exempt income during the year.

The learned departmental representative payment is submitted that though assessee has claimed that only

We have carefully considered the rival contention and perused the orders of the lower authorities. We find that assessee has earned the exempt income of ₹ 1,269,909/– but has not made any disallowance. The learned assessing officer has recorded the satisfaction that assessee has incurred an expenditure of securities transaction tax which is also not been disallowed by the assessee and further it might have incurred the several expenditure for the purpose of sale and purchase of the mutual fund. Accordingly, he proposed to disallow 1% of the average value of investment. The claim of the assessee is that the mutual fund in which tax-free income is received is amounting to ₹ 3,377,5921 at the beginning of the year and ₹ 27,189,854 at the end of the year. Therefore, only the average of these two amounts can be made and 1% disallowance thereof should be worked out. Accordingly, the total amount of investment based on which tax-free income is received during the year is only ₹ 304,82,887. We find that the above contention is also supported by the several judicial precedent that only those investments

In the result, appeal of the assessee is partly allowed.