KASHISH MULTITRDE PRIVATE LIMITED,MUMBAI vs. CENTRAL CIRECLE 4 (3) , MUMBAI, MUMBAI

The Ld. CIT (A) erred in uploading the action of AO of disallowance under section 14A of the Act read with Rule 8D of the I T Rule, 1962. 2. The Ld. CIT (A) did not appreciate that appellant has already disallowed the expenses related to investment activities and also disallowed further amount to the extent of dividend earned and, therefore, no further disallowance could have been made u/s 14A of the Act.

The Ld. CIT (A) did not appreciate that the further disallowance made by him has resulted in entire amount debited to the Statement of Profit & Loss being disallowed though the appellant besides the investment activities capable of yielding exempt income has also earned taxable income from host of other activities.

The Ld. CIT (A) erred in relying upon case law and article of an author which are out of context.

As per the facts of the present case the assessee has raised four grounds of appeal and all the grounds are interrelated and interconnected and relates to challenging

The brief facts of the case are that the case of the assessee was selected for limited scrutiny on the following reasons:

Since the assessee could not submit satisfactory explanation, therefore AO considered the fact that as against the total exempt income of Rs. 2,15,71,266/-, the assessee has disallowed sum of Rs. 2,08,544/-, therefore the AO while not satisfied with the accounts of the assessee, made disallowance u/s 14A r.w.s 8(D)(i) of Rs. 5,10,881/-

The Ld. CIT(A) after considering the written submissions filed before him decided the appeal of the assessee by holding that the disallowance u/s 14A cannot exceed the exempt income and thus adjudicated the same

Ground Nos. 1 to 2: These grounds relate to very same issue of disallowance u/s. 14A r.w.r. 8D(ii) of the Act and hence taken up together for adjudication.

1. According to the appellant, it has already made so-moto disallowance of Rs.2,08,544/- to the extent of dividend income. Besides, it has also disallowed share transaction charges of Rs 36,714/-. According to the AO, the total disallowance u/s. 14A amounts to Rs.15,90,691/- as per Rule 8D of the Act. However, the same has been restricted to Rs.5,10,881/- as per the balance of total expenses claimed by the appellant.

2. The Hon'bie Juri ictional High Court in the case of PCIT vs. Ballarpur Industries Ltd. in ITA No. 51 of 2016 held that in the absence of any exempt income, disallowance u/s. 14A of the Act could not be made.

3. Although the explanation of sec. 14A inserted by the Finance Act, 2022 can be treated to be clarificatory in nature, the Hon'ble Delhi High Court in the case of M/s. Era Infrastructure (India) Ltd. in ITA No. 204/2022 & CM APPL. 31445/2022 dated 20.07.2022 has held that the provisions cannot be treated to be retrospective. Hence, the claim of the appellant that disallowance u/s. 14A cannot exceed the exempt income is backed by judicial precedence and binding in nature.

4. In view of the above, there is merit in the claim of the appellant that the disallowance u/s. 14A cannot exceed the exempt income. As per the appellant's claim out of total expenses of Rs.8,70,932/- the appellant has already disallowed Rs. 3,60,051/- in respect of Sec. 14A, House

5. The perusal of the computation filed by the appellant shows that the appellant has claimed the following two amount as exempt income during the year dividend u/s. 10(34) of Rs.2,08,544/- and LTCG on Listed Securities u/s. 10(38) of Rs.2,13,62,721/-. Thus, the disallowance u/s. 14A cannot exceed Rs.2,15,71,266/-. In the instant case, even after including the disallowance made by the AO, the disallowance does not exceed the total exempt income received. In view of the above, the disallowance of Rs.5,10,881/- made by the AO u/s. 14A is upheld.

6. As regards the appellant's contention that the entire expenses have been disallowed, the same is devoid by merit.

7. I find that the Hon'ble Supreme Court has held on many occasions that taxation and equity are strangers and it is the job of the courts to interpret the provisions only in the event of ambiguity or conflict and not where the provisions of the Act are unequivocal.

8. The ratio laid down by the Hon'ble Supreme Court in the case of H Η Lakshmibhai vs CWT, 206 ITR 688 is relevant, wherein it was held that, "It is settled law that a taxation statute in particular has to be strictly construed and that there is no equity in a taxing provision. It is because of this that the strict interpretation of the proviso would cause hardship to small depositors as against the richer ones, even if true, has no relevance."

After having gone through the decisions passed by the revenue authorities and considering the submissions of the Ld. DR, I am of the view that the revenue authorities have rightly disallowed sum of Rs. 5,10,881/- u/s 14A of the Act. No written submissions or 6 Kashish Multitrade Pvt Ltd, Mumbai documentary evidences have been filed before me in order to controvert or rebut the findings so recorded by the revenue authorities.

In the result the appeal filed by the assessee stands dismissed. Order pronounced in the open court on 18.02.2025. (SANDEEP GOSAIN) JUDICIAL MEMBER

अपीलाथ / The Appellant 2. थ / The Respondent. 3. संबंिधत आयकर आयु / The CIT(A) 4. आयकर आयु(अपील) / Concerned CIT 5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, मुबई / DR, ITAT, Mumbai 6. गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, सािपत ित ////

उप/सहायक पंजीकार ( Asst.