FORERUNNER CAPITAL INVESTMENTS LIMITED,DELHI vs. WARD 9(1), DELHI, AO NO. 92, RANGE CODE-40, C.R. BUILDING, DELHI

ITA 4970/DEL/2026Status: DisposedITAT Delhi29 September 2026AY 2017-184 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the assessee is a registered NBFC that earned dividend income. It was an undisputed fact that no suo-moto disallowance was made by the assessee for earning exempt income, and no material was brought on record to show direct expenditure incurred for earning exempt income. The Tribunal noted that Rule 8D(ii) provides for a disallowance of 1% of the annual average of monthly averages of opening and closing balances of investments. However, the Tribunal emphasized that disallowance under Section 14A cannot exceed the actual expenditure. Upon perusal of the documents, the Tribunal found that apart from statutory compliance expenses and depreciation, the only expenditure claimed by the assessee was rent of Rs. 30,000/-. Therefore, the Tribunal was of the considered view that the disallowance under Section 14A of the Act should be restricted to the rent expenditure only. The appeal of the assessee was partly allowed.

What were the facts?

The assessee, Forerunner Capital Investments Limited, an NBFC, filed an appeal against the order of the CIT(A), Delhi-3, for Assessment Year 2017-18. The assessee received dividend income of Rs. 42,73,338/-. The Assessing Officer (AO) disallowed the entire expenditure of Rs. 8,30,334/-, claimed by the assessee, under Section 14A read with Rule 8D. This expenditure included depreciation, audit fee, provision for expenses (MCA challan filing fee), rates and taxes, and rent. The assessee argued that depreciation is a statutory allowance, audit fees and MCA challan fees are for statutory compliance, and rent is for office premises. The assessee contended that disallowance under Section 14A should only be in respect of direct expenditure related to rental income.

What were the issues?

1. Whether the disallowance under Section 14A read with Rule 8D of the Income Tax Act, 1961, made by the Assessing Officer on the entire expenditure claimed by the assessee is justified, when the assessee is an NBFC earning dividend income and has claimed various statutory and administrative expenses? Assessee's Contentions: - Depreciation is a statutory allowance under Section 32 of the Act. - Audit fees, provision for expenses (MCA challan filing fee), and rates and taxes are mandatory statutory compliance expenditures. - Rent is paid for maintaining office premises for regular administrative and corporate functions. - Disallowance under Section 14A, if any, should be restricted to direct expenditure related to rental income. Revenue's Contentions: - The revenue, relying on the findings of the CIT(A), prayed for the dismissal of the assessee's appeal.

Which sections of the Income-tax Act were involved?

Section 14A,Section 32

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI

Before: SHRI VIKAS AWASTHY

For Respondent: Shri Nirmal Nangia, Sr. DR

PER VIKAS AWASTHY, JUDICIAL MEMBER:

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), Delhi-3 [in short ‘the CIT(A)’] dated 08.09.2020, for Assessment Year 2017-

18.2.

Ms. Sangeeta Singh, appearing on behalf of the assessee submits that the assessee is a Non-Banking Finance Company (NBFC) engaged in activities of financing and i

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 14A

All 15,875 judgments and leading authorities on Section 14A →

Recent GST High Court judgments

Search GST case law →