STUTI SECURITIES PVT. LTD.,,KOLKATA vs. ITO, WARD 8(4),, KOLKATA

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ITA 933/KOL/2026Status: DisposedITAT Kolkata19 June 2026AY 2016-20176 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the disallowance under Rule 8D(2)(iii) should only be on investments yielding exempt income, not the entire average investment. It upheld the disallowance under Rule 8D(2)(i) and the assessee's own disallowance under Rule 8D(2)(iii), resulting in a total disallowance of Rs. 5,030/-.

What were the facts?

The assessee filed an appeal against the disallowance of Rs. 5,66,292/- under Section 14A of the Income Tax Act. The Assessing Officer (AO) made a disallowance of Rs. 5,69,610/-. The assessee argued that its own funds exceeded investments and the exempt income was minimal.

What were the issues?

Whether the disallowance under Section 14A read with Rule 8D was correctly calculated by the AO, particularly regarding the basis for calculating the disallowance on investments.

Which sections of the Income-tax Act were involved?

Section 14A,Section 115JB

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, KOLKATA

For Appellant: Shri Manish Tiwari, AR
For Respondent: Shri Sanjit Kumar Das, CIT-DR
Hearing: 16.06.2026Pronounced: 19.06.2026

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, KOLKATA SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER

ITA No. 933/KOL/2026 Assessment Year : 2016-2017

Stuti Securities Pvt. Ltd., Vs. ITO, Ward 8(4), Suite No. 2D & E, Kolkata, 12, Ho-chi-minh Sarani, Aaykar Bhawan, P-7, Kolkata - 700071 Chowringhee Square, [PAN: AADCS5957J] Kolkata - 700069 APPELLANT RESPONDENT

Assessee by : Shri Manish Tiwari, AR Revenue by : Shri Sanjit Kumar Das, CIT-DR

Date of hearing : 16.06.2026 Date of Pronouncement : 19.06.2026

O R D E R This is an appeal filed by the assessee against the order passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “the Ld. CIT(A)] dated 21.12.2022, DIN & order No. ITBA/NFAC/S/250/2022- 23/1048128097(1) on the following grounds of appeal:

“1. That on the facts and in the circumstances of the case, order dated 21.12.2022 passed u/s 250 of the Act, 1961 by the Ld. CIT(A)-NFAC is erroneous and not sustainable in law.

2 ITA No. 933/KOL/2026 Stuti Securities Pvt. Ltd. 2. (a) That on the facts and in the circumstances of the case, Ld. CIT(A)- NFAC. Delhi erred in confirming the disallowance to the tune of Rs. 5,66,292/- u/s 14A of the Income-tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962. (b) That on the facts and in the circumstances of the case, the Ld. CIT(A)- NFAC, Delhi erred in law in relying upon an erroneous interpretation of the Explanation inserted by the Finance Act, 2022 and Circular No. 5/2014 dated 21.02.2014, to uphold the disallowance under section 14A made by the Ld. AO. 3. That on the facts and in the circumstances of the case, Ld. CIT(A)-NFAC, Delhi erred in confirming the action of AO who made addition to the tune of Rs. 5,69,610/- on account of disallowance u/s 14A while computing the Book Profit u/s 115JB of the Act of the appellant. 4. That the appellant craves leave to add, alter, amend or withdraw any of the above grounds of appeal at or before the time of hearing of the appeal.” 2. At the outset of hearing, it was noticed that the appeal filed by the assessee is delayed by 1109 days. In this regard, the assessee has stated the reasons for delay in filing the appeal and submitted that Mrs. Neelam Newatia was suffering from disease, therefore, the appeal could not be filed and furnished the medical report for last three years along with an affidavit explaining the reasons. On going through the same, I found that the assessee had “reasonable cause” for not filing appeal within the due date. Therefore, relying on the judgment of Collector, Land Acquisition vs Mst. Katiji, (1987) 167 ITR 171 (SC), we condone the delay and the appeal is taking for adjudication.

3.

Briefly stated the facts of the case are that the assessee filed return of income on 13.04.2016 declaring total income of Rs. 7,06,000/-. The case was selected for scrutiny under CASS limited scrutiny for the reasons that interest expenses related to exempt income under Section

3 ITA No. 933/KOL/2026 Stuti Securities Pvt. Ltd. 14A of the Act. Accordingly, notice under Section 143(2) of the Act was issued on 10.07.2017 which was duly served upon by the assessee. Subsequently, other statutory notices were issued to the assessee. In this regard, the assessee was asked to explain regarding disallowance of expenditure under Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962. In this regard, the assessee furnished reply “there was dividend income of Rs. 671/- during the relevant assessment year it may be noted that disallowance under Section 14A of the Act at Rs. 3,318/- was made in the computation of income, the same has been calculated at 0.5% of quoted investments it means Rs. 6,63,574/-. The AO noted that there is investment of Rs. 11,92,74,674/-, the AO after referring to various judgments and CBDT Circular No. 246/141/2017- A-PAE-1, dated 10.01.2018 and Circular No. 5/2014 dated 01.02.2014 computed the disallowance of Rs. 5,69,610/-.”

4.

Aggrieved from the above order, the assessee filed appeal before the Ld.CIT(A). The Ld.CIT(A) dismissed the appeal of the assessee.

5.

The Ld. Counsel reiterated the submission made before the lower authorities and submitted that during the impugned assessment year the own fund of the assessee was more than the investment made and exempt income was received of Rs. 671/-, the assessee itself has calculated the disallowance of Rs. 3,318/- which is 0.5% of investment

4 ITA No. 933/KOL/2026 Stuti Securities Pvt. Ltd. in quoted shares in which the assessee has received exempt income which is supported by Rule 8(d)(2)(iii). The 8D(2)(i) and rule 8D(2)(ii) of the Rules will not will apply in this case.

6.

On the other hand, the Ld. DR supported the order of lower authorities.

7.

Considering the rival submissions, the AO has disallowed under Rule 8D(2)(iii) @ 0.5% of average investment of Rs. 11,35,79,674/- and Rule 8D(2)(i) which is directly related to investment of Rs. 1,712/-. Accordingly, here the dispute is only for Rs. 5,69,610/- (Rs. 5,67,898/- + Rs. 1,712/-). During the impugned assessment year, the assessee received exempt income of Rs. 671/- and the assessee himself has disallowed of Rs. 3,318/- under Section 14A of the Act calculated at 0.5% of the investment in quoted shares. I noted that as per Rule 8D(2)(iii) of the Rules the disallowance can be made 0.5% on those investments only which has yielded exempt income. However, the AO has calculated 0.5% on the entire value of average investments which is not applicable and the AO has calculated under Rule 8D(2)(i) of Rs. 1,712/- since the assessee has computed disallowance under Section Rule 8D(2)(iii) of the Rules on the exempt income has been received. Accordingly, I upheld the disallowance made under Rule 8D(2)(i) of Rs. 1,712/- and under Rule 8D(2)(iii) of Rs. 3,318/-. Accordingly, total disallowance is made of

5 ITA No. 933/KOL/2026 Stuti Securities Pvt. Ltd. Rs. 5,030/- ( 3318+1712). Accordingly, the balance addition made by the AO is hereby deleted.

8.

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

Order pronounced on 19.06.2026.

Sd/- (Laxmi Prasad Sahu) Accountant Member Dated: 19.06.2026 AK, Sr. P.S.

6 ITA No. 933/KOL/2026 Stuti Securities Pvt. Ltd. Copy of the order forwarded to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. CIT(DR)

//True copy// By order

Assistant Registrar, Kolkata Benches

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