DCIT CIRCLE-4(1)(1), AHMEDABAD, AAYKAR BHAVAN VEJALPUR vs. SYMPHONY LIMITED, BODAKDEV

With C.O. No. 81/Ahd/2025 (Assessment Year: 2020-21) Deputy Commissioner of Symphony Ltd., Vs. Income Tax, FP-12, TP-50, Symphony House, Circle-4(1)(1), Off S.G. Highway, Bodakdev, Ahmedabad Ahmedabad-380059 [PAN : AACCS6739B] (Appellant) .. (Respondent/Cross Objector) Assessee represented by : Shri Amol Mahajan & Shri Hiral Desai, ARs Revenue represented by: Shri Uady Kishanrao Kakne, Sr. DR Date of Hearing 09.10.2025 Date of Pronouncement 12.12.2025 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-

This appeal has been filed by the Revenue and the corresponding Cross Objection has been filed by the assessee against the order dated 25.06.2025, passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “Ld. CIT(A)”] under section 250 of the Income-tax Act, 1961 [“the Act”] for the Assessment Year (AY) 2020–21.

(a) The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs. 3,1,29,516/- made by the AO u/s 14A r.w. Rule 8D of the Income-tax Rules, without appreciating that the assessee failed to establish with evidence that no interest-bearing funds were utilized for investments yielding exempt income and did not furnish the required workings under Rule 8D, contrary to the principles laid down by the Hon’ble Calcutta High Court in Dhanuka & Sons V/s. CIT (Cent. 1), Kolkata 319 (2011).

(b) The appellant craves leave to add, alter and /or to amend all or any the ground before the final hearing of the appeal.

Disallowance under section 14A of the Income-tax Act 1961 ('the Act') read with Rule 8D of the Income-tax Rules. 1962 ('the Rules')

2. On the facts, in the circumstances of the case and in law, the Ld. AO erred in making an additional disallowance under section 14A of the Act without appreciating that the Assessee had already made a suo-motu disallowance based on a logical, well-reasoned and scientific approach and therefore, further disallowance by invoking Rule 8D of the Rules was not applicable.

3. On the facts, in the circumstances of the case and in law, the Ld. AO erred in making an additional disallowance under section 14A of the Act without recording proper satisfaction, prior to invocation of Rule 8D of the Rules.

4. Without prejudice to the above, on the facts, in the circumstances of the case and in law, the Ld. AO erred in making an additional disallowance under section 14A of the Act by recording his satisfaction based only on the fact as to whether interest-free funds were utilized for making the investments without appreciating that no disallowance can be made for indirect interest expenditure based on the now amended Rule 8D(2)(ii) of the Rules.

5. On the facts, in the circumstances of the case and in law, the Ld. AO erred in making a disallowance under section 14A of the Act without appreciating that the Assessee had duly substantiated at the time of assessment proceedings, that it did not have any borrowed funds and hence the entire investments were made from its owned funds only.

The Assessee prays that the relief provided by the Ld. CIT(A) be affirmed and the disallowance under section 14A of the Act be deleted.

Initiation of penalty proceedings under section270A of the Act

6. On the facts, in the circumstances of the case and in law, the Ld. AO erred in initiating penalty proceedings under section 270A of the Act alleging that the Assessee has under reported particulars of income.

The Assessee prays that penalty proceedings initiated by Ld. AO to be dropped.

The Assessee craves leave to add, alter, amend or withdraw all or any of the Cross Objections and to submit such statements, documents and papers as may be considered necessary either at or before the hearing of the appeal.

5. We have gone through the relevant record and in the impugned order. Ld. AR filed voluminous paper book in support of its contention and stated that his reserve and surplus are of Rs.156067282/- and his investment of Rs.125383779/- and the same is evident from the paper-book at page No5. Therefore, Section 14A read with Rule 8D is not application to him read with Rule 8D is not permissible. In the case of Pr. Commissioner of Income Tax vs. Sintex Industries Ltd, (2018) 93 Taxmann.com 24 (SC) has held in favour of assessee holding that where assessee had surplus fund against which minor investment was made, no question of making any disallowance of expenditure u/s 14A of the Act arose and therefore, there was no question of any estimation of expenditure under Rule 8D of the Income-tax Act. Thus, respectfully following the aforesaid Apex Court judgment, we delete the addition made by the lower authorities.

7. We have gone through the provision of the Act and the rationale of the disallowance determined by the assessee. We find that the assessee has considered the time utilized for purchase and sales transactions of the investments carried out employees and the relevant salary cost. We find that the assessee has allocated proportional the salary cost of the Executive Director, GM Finance, Assistant Manager and others senior Executive. Ergo, we find no reason for the revenue authorities to invoke the provisions of 14A(2).

5. We have heard both parties and perused the material available on record, including earlier years’ orders of Tribunal in the assessee’s own cases. It is an admitted fact that the assessee had sufficient own funds, far exceeding the investments made in tax-exempt instruments and the assessee had voluntarily made a suo motu disallowance towards expenditure incurred to earn exempt income. Therefore, in light of the binding precedents in assessee’s own cases and in absence of any material change in facts or law, we find no reason to interfere with the order passed by the Ld. CIT(A). Accordingly, we uphold the deletion of disallowance made under section 14A by the Ld. CIT(A). The Revenue’s appeal is thus dismissed.

The order is pronounced in the open Court on 12.12.2025.