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Facts
The appeals were filed by the Revenue challenging the orders of the CIT(A) which deleted additions made by the Assessing Officer. The additions related to non-deduction of TDS on payments to Mutual Fund Distributors and disallowance under Section 14A.
Held
The Tribunal held that the payments made to Mutual Fund Distributors were not in the nature of technical services, following its own earlier orders. It also found no infirmity in the CIT(A)'s deletion of disallowance under Section 14A, deeming it a double disallowance.
Key Issues
Whether payments to Mutual Fund Distributors constitute technical services for disallowance under Section 40a(ia), and whether the disallowance under Section 14A r.w. Rule 8D was justified.
Sections Cited
40a(ia), 14A, 194H
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Before: Shri S.S. Viswanethra Ravi & Shri S.R. Raghunatha
O R D E R
PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:
Both the appeals filed by the assessee are directed against the different orders dated 18.02.2025 passed by the ld. Commissioner of Income Tax (Appeals) 16, Chennai, for the assessment years 2013-14 and 2015-16.
Since, the issues raised in these appeals are similar based on the same identical facts, with the consent of both the parties, we proceed to hear all the appeals together and pass consolidated order for the sake of convenience.
First, we shall take up appeal in – AY 2013-14 for adjudication.
We find that this appeal is filed with a delay of 110 days. The DCIT Circle 1 (LTU), Chennai filed a condonation petition for the delay stating the reasons. Upon hearing both the parties and on examination of the said affidavit, we find the reasons stated by the DCIT are bonafide, which really prevented in filing the appeal in time. Thus, the delay is condoned and admits the appeal for adjudication.
Ground No. 1 raised by the Revenue is general in nature and requires no adjudication.
Ground Nos. 2 to 5 raised by the Revenue in challenging the action of the ld. CIT(A) in deleting the addition made under section 40a(ia) of the Income Tax Act, 1961 [“Act” in short] for violation of non-deduction of TDS in the facts and circumstances of the case.
At the outset, we note that the Assessing Officer disallowed an amount of ₹.9,10,89,253/- for non-deduction of TDS for the payment made to the Mutual Fund Distributors and accordingly, added the same to the total income of the assessee vide order dated 30.01.2020. The assessee challenged the same before the ld. CIT(A) and the ld. CIT(A) by placing reliance on the order of the ITAT in assessee’s own case for AY 2008-09, deleted the said disallowance, holding that the services rendered by the mutual fund brokers cannot be termed as technical services.
The ld. DR Ms. C. Vatchala, CIT did not rebut the order of the ITAT in assessee’s own case as relied on by the ld. CIT(A).
The ld. AR Shri Venkat Ramanan, C.A. placed on record order dated 19.07.2013 in and referred to para 12 (vii) at page 22 to 25.
Heard both the parties and perused the material available on record. On perusal of the said order, it is noted that the definition of “Securities” as defined under Securities Contracts (Regulation) Act, 1956, the securities include mutual funds and the provisions of section 194H of the Act excludes commission or brokerage paid on securities and consequently, held that the services rendered by the Mutual Fund Brokers cannot be termed as technical services as well. On perusal of the impugned order, it is noted that by following the ITAT order referred above, the ld. CIT(A) deleted the addition made by the Assessing Officer on account of payment made to mutual fund distributors under section 40(a)(ia) of the Act. Having no contrary decision to the order of the ITAT in assessee’s own case, we find no infirmity in the order of the ld. CIT(A) and it is justified. Thus, the ground Nos. 2 to 5 raised by the Appellant- Revenue are dismissed. – AY 2015-16
We find that this appeal is filed with a delay of 110 days. The DCIT Circle 1 (LTU), Chennai filed a condonation petition for the delay stating the reasons. Upon hearing both the parties and on examination of the said affidavit, we find the reasons stated by the DCIT are bonafide, which really prevented in filing the appeal in time. Thus, the delay is condoned and admits the appeal for adjudication.
Ground No.1 raised by the Revenue is general in nature and requires no adjudication.
Ground No. 2 raised by the Revenue in challenging the action of the ld. CIT(A) in deleting the disallowance of ₹.12,19,651/- under section 14A of the Act r.w.s. Rule 8D.
At the outset, we note that the assessee earned exempt income of ₹.30,23,577/- and the assessee had made disallowance of ₹.24,33,759/- on its own being the expenses incurred in relation to such exempt income. The Assessing Officer made further disallowance of ₹.12,19,651/- under section 14A of the Act r.w. Rule 8D. The ld. CIT(A) held the same would lead to double disallowance and deleted the same vide his reasons recorded at para 5.4.3 of the impugned order. On perusal of para 5.4.3 of the impugned order, we find no infirmity in the order of the ld. CIT(A) in deleting the addition made by the Assessing Officer in addition to the disallowance made by the assessee on its own. Thus, ground No. 2 raised by the Revenue fails and dismissed.
Ground No. 3.1 to 3.3 raised by the Revenue in challenging the action of the ld. CIT(A) in deleting the addition made by the Assessing Officer under section 40a(ia) of the Act with reference to the payment made by the assessee to Fund Quest in the nature of royalty.
At the outset, we note that the ld. CIT(A), by following ITAT’s order in assessee’s own case for AY 2008-09, held the payments made to Fund Quest are not in the nature of royalty and we find no contrary view to the order of the ITAT is placed on record. Accordingly, ground No. 3.1 to 3.3 raised by the Revenue are dismissed.
Ground No. 4.1 to 4.3 raised by the Revenue in challenging the action of the ld. CIT(A) in deleting the addition made on account of repairs of leasehold premises held not revenue in nature.
At the outset, it is noted that the ld. CIT(A), by following ITAT’s order in assessee’s own case for AY 2008-09, 2009-10, 2010-11 & 2011- 12, held the expenditure incurred on interiors and renovation are revenue in nature. Therefore, we find no infirmity in the order of ld. CIT(A). Thus, ground No. 4.1 to 4.3 raised by the Revenue are dismissed.
Ground No. 5.1 to 5.5 raised by the Revenue in challenging the action of the ld. CIT(A) in deleting the addition made under section 40a(ia) of the Act with reference to the payments made to the mutual fund distributors.
Similar issue on identical facts raised in the AY 2013-14 in wherein, we have confirmed the order of the ld. CIT(A) in deleting the addition made by the Assessing Officer on account of payment made to mutual fund distributors under section 40(a)(ia) of the Act and our decision would equally applicable to the AY 2015-16 as well. Thus, the ground Nos. 5.1 to 5.5 raised by the Revenue are dismissed.
In the result, both the appeals filed by the Revenue are dismissed. Order pronounced on 13th March, 2026 at Chennai.