DIWAKAR VINIYOG PVT. LTD. (SINCE MERGED WITH DIWAKAR FINVEST PVT. LTD., FORMERLY KNOWN AS SNEHA ENCLAVE PVT. LTD.),KOLKATA vs. D.C.I.T., CIRCLE - 5(1), KOLKATA

ITA 2743/KOL/2026Status: DisposedITAT Kolkata07 October 2026AY 2018-20196 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal allowed the grounds of appeal raised by the assessee. The Tribunal respectfully followed the decision of the Hon'ble Calcutta High Court in the case of Principal Commissioner of Income-tax vs. Shalimar Pellet Feeds Ltd. In that case, the Hon'ble High Court held that the machinery provision under Rule 8D can be applied only with regard to the shares which yielded dividend income in the year under consideration. Therefore, the Tribunal found that the CIT(A) had erred in confirming the disallowance made by the AO on investments that did not yield dividend income. The disallowance of ₹2,65,36,969/- was deleted. The appeal filed by the assessee was allowed.

What were the facts?

The assessee, Diwakar Viniyog Pvt. Ltd. (now merged with Diwakar Finvest Pvt. Ltd.), filed an appeal against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi, for Assessment Year 2018-19. The Assessing Officer (AO) made an addition of ₹2,65,36,969/- under Section 14A read with Rule 8D, disallowing expenses related to investments that did not yield dividend income. The AO applied Rule 8D(2)(ii) to the average value of total investments, including listed and unlisted equities and preference shares. The assessee had already offered a suo motu disallowance of ₹1,12,32,028/-. The CIT(A) confirmed the AO's addition, relying on Maxopp Investment Ltd. vs. CIT and CBDT Circular No. 5/2014.

What were the issues?

1. Whether the Ld. CIT(A) was justified in confirming the AO's action of making a further disallowance of ₹2,65,36,969/- under Section 14A read with Rule 8D by applying the computation under Rule 8D(2)(ii) to the average value of total investments, instead of only those investments that actually yielded dividend income during the year? (Question of law and fact, concerning Section 14A and Rule 8D). Assessee's contentions: The assessee argued that the suo motu disallowance was made only on listed securities from which dividend was earned. Since no dividend was earned from unlisted securities, they should not be considered for disallowance under Section 14A. The assessee relied on PCIT vs. Shalimar Pellet Feeds Ltd. (Cal HC), Suryamani Financing Company Ltd. vs. ITO (ITAT Kol), CHNHB Health Insurance Co. Ltd. vs ACIT (ITAT Kol), and Nagreeka Foils Ltd. vs. DCIT (ITAT Kol). Revenue's contentions: The revenue relied on the order of the Ld. CIT(A) and requested its confirmation.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH AT KOLKATA

Before: SHRI YOGESH KUMAR US & SHRI RAKESH MISHRA

For Appellant: CA. प्रत्यर्थी के ओर से/

PER RAKESH MISHRA, ACCOUNTANT MEMBER:

This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [Ld. 'CIT(A)'] passed ITA No(s). 2743/KOL/2026 Assessment Year(s) 2018-19 Diwakar Viniyog Pvt. Ltd. (Since merged with Diw

The order continues below.

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