SAMCO SECURITIES LIMITED,MUMBAI vs. CIT (A) NFAC, DELHI

The solitary issue in the grounds of appeal filed by the assessee is related to confirming disallowance u/s 14A of the Act of Rs.1,51,214/- .

The fact in brief is that the assessing officer completed the assessment u/s 143(3) by assessing the total income at Rs.390,655/-. During the course of assessment on perusal of the balance sheet the assessing officer noticed that assessee company has made investment in equity share of Rs.302,42,807/-. The assessee has shown dividend income from investment in equity share and mutual fund to the amount Rs.401,277/- and claimed the same as exempt u/s 10(34) of the Act. The AO noticed that assessee has not made any disallowance u/s 14A of the Act. The assessing officer has computed the disallowance u/s 14A r.w.Rule 8D to the amount of Rs.151,214/- and added to the total income of the assessee.

Aggrieved, the assessee filed the appeal before the ld. CIT(A). However, the ld. CIT(A) has dismissed the appeal before the ld. CIT(A).

Heard the ld. D.R and perused the written submission filed by the assessee. During the course of appellate proceeding before us the assesse has filed written submission vide dated 04.07.2023 along with paper book. In the paper book the assessee has placed on record copies of balance sheet profit and loss account for the financial year 2015-16, computation of income for assessment year 2016-17 and copy of letter dated 26.11.2018 submitted by the assessee to the assessing officer on 28.11.2018. The assesse explained that it had made investment from its own tax free funds available from share capital and reserves and no investment was made out of borrowed funds on which the exempt income was earned. In this regard, we have perused the submission of P a g e | 3 26.11.2018 placed in the paper book wherein the assessee has mentioned that it had made investment out of its own funds and therefore, no disallowance should be made u/s 14A of the Act. We have perused the computation made by the assessing officer at para 4.12 of the assessment order and noticed that assessing officer has only made disallowance as per Rule 8D(2)(iii) to the amount of Rs.151,214/- pertaining to the administrative expenditure and assessing officer has not made any disallowance under Rule 8D(2)(i) and 8D(2)(ii). However, the assessee in its alternative submission has submitted that for making disallowance u/s 14A the investment from which exempt income is required to be considered instead of average of total investment. In this regard, the assesse has placed reliance on the following judicial pronouncements. “Ameya Logistics Pvt. Ltd. v. Dy. CIT (2020) 83 ITR 46(SN) (Mum.)(Trib.) ACB India Ltd. Vs. ACIT, [2015] 62 taxmann.com 71 (Delhi) PTC India Ltd. v. DCIT (2019) 69 ITR 37(SN.) (Delhi) (Trib.) ACIT v. Vireet Investment Pvt. Ltd. (2017) 165 ITD 27/58 ITR 313/154 DTR 241/188 TTJ 1 (SB) (Delhi)(Trib.) Dy. CIT v. Diamond Co. Ltd. (2017) 162 ITD 131 (Kol.) (Trib.) Yashoda Health Care Services P. Ltd. v. DCIT (2017) 54 ITR 26 (Hyd.) (Trib.)”

We consider that the AO has not decided the alternative claim of the assessee. To compute the exempt income after taking into consideration the investment on which the exempt income earned instead of average of total investment. This fact required to be verified. Therefore, we restore this alternative contention of the assessee to the assessing officer for verifying the claim of the assesse to restrict the disallowance to the extent of average investment from which exempt income was received instead of total investment, therefore, the ground of appeal of the assessee is allowed for statistical purposes.