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Income Tax Appellate Tribunal, Mumbai “D” Bench, Mumbai.
Before: Shri B.R. Baskaran (AM) & Shri Narender Kumar Choudhry (JM)
Per B.R.Baskaran (AM) :-
Both the appeals filed by the assessee are directed against the separate orders dated 14.2.2023 passed by the learned CIT(A)-54, Mumbai and they relate to the A.Y. 2017-18 & 2018-19.
Learned counsel appearing for the assessee submitted that the assessee has challenged the enhancement of disallowance made by the Assessing Officer under section 14A of the Act in both the years. The Learned AR submitted that the Assessing Officer has computed the “average value of investments” taking into account all the investments, i.e., including the investments which did not yield any dividend income. The plea of the assessee to consider only those investments which has yielded exempt dividend income for the purpose of computing average value of investment was not accepted by the Assessing Officer. Accordingly, the AO increased the 2 Morgan Credits Pvt. Ltd.
amount of disallowance u/s 14A of the Act that that voluntarily disallowed by the assessee. The appeals filed by the assessee before the learned CIT(A) for both the years under consideration were dismissed.
The Learned AR submitted that it is well settled proposition that only those investments which have yielded exempt dividend income alone should be considered for computing ‘average value of investments’ for the purposes of Rule 8D of IT Rules. In support this submission, Ld A.R placed his reliance on the decision of Hon'ble Kolkata High Court decision in the case of PCIT Vs. Shalimar Pellet Feeds Ltd. (2023) 453 ITR 547 and also on the decision rendered by Hon'ble High Court of Delhi in the case of Cargo Motors (P) Ltd. Vs. DCIT (2023) 453 ITR 554. Accordingly learned AR prayed that the Assessing Officer may be directed to follow the above said decisions and compute the average value of the investment by considering only those investments which have yielded exempt dividend income.
We heard learned DR and perused the record. We noticed that Hon'ble Kolkata High Court and Hon'ble Delhi High Court in the above cited cases have held that the average value of investments have to be computed for the purpose of section 14A read with rule 8D of the I.T. Rules by considering only those investments which have yielded dividend income. We noticed that the assessee’s prayer is in accordance with the above said decisions and hence there is merit in the said prayer.
Accordingly we set aside the orders passed by the learned CIT(A) in both the years under consideration on this issue and restore the matter to the file of the Assessing Officer with the direction to compute the average value of investments by considering those investments which have yielded dividend income. We order accordingly.
3 Morgan Credits Pvt. Ltd.
In the result both the appeals filed by the assessee are treated as allowed for statistical purposes.
Order pronounced in on 20.09.2023.