DSP INVESTMENT P.LTD,MUMBAI vs. DCIT 2(1)(1), MUMBAI

Date of Hearing 02/12/2019 Date of Pronouncement 02/12/2019 आदेश / O R D E R आदेश आदेश आदेश PER G.MANJUNATHA:ACCOUNTANT MEMBER

This appeal filed by the assessee is directed against, the order of the Ld. Commissioner of Income Tax (Appeals)–4, Mumbai, dated 31/08/2018 and it pertains to Assessment Year 2014-15.

2. The assessee has raised the following grounds of appeal:- 1 a) On the facts and circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the appellant has disallowed expenditure of Rs,25,85,711/- u/s 14A on proportionate basis which is reasonable as held by the Hon’ble IT T 'D' bench in Appeal No. ITA 6214/Mum./2011 dt 19/12/2016 in the appellant's own cage for A.Y. 2008-09 on an identical issue arid ought to have accepted the said disallowance.

b ) On the facts and circumstances of the case and in law the Commissioner of Income Tax (Appeals) has failed TO appreciate that the total income as per books and as pet Income Tax Act is computed differently and has erred while calculating the %age of exempt income to total income by considering the net taxable income as per IT. Act and not as per the Profit & Loss A/c and thereby disallowing u/s 14A Rs..2,06,48076/-. c) On the facts and circumstances of the case and in law the Commissioner of Income Tax (Appeals) has overlooked that the total as pet Income Tax Act is computed after various deductions, allowances, indexed cost for LTCG, b/f losses set off, etc. and cannot be the basis for working out the %age of exempt income to total income by considering the net taxable income as pet I.T Act an not as per the Profit & Loss A/c and thereby disallowing u/s 14A Rs.2,06,48,076 /-. d) On the facts and circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) though he has respectfully followed Hon'ble ITAT ‘D' Bench fn the appellant's own case but has erroneously held that there is a mistake in the calculation or correctness of the expenses by the appellant and thereby disallowing u/s 14A Rs. 2,06,48076/- as per the appellant’s own case. b) On the facts and circumstances of the case and in law the teamed Commissioner of Income Tax (Appeals) has erred in misconstruing the decision of the Hon’ble ITAT 'D’ Bench in Appeal No. ITA 62l4/Mum/2011 dt. 19/12/2016 in the appellant's own case for A.Y. 2008 - 09 and also for AY 2009 - 10, 2010 -11 AND ay 2011 - 12 or an identical issue and ought to have accepted the said disallowance of Rs.25,85,711/- u/s 14A as per the appellant. c ) On die facts and circuit stances of the ease mid in law the learned Commissioner of Income Tax (Appeals) has failed to appreciate that as per the provisions of section 14A it is necessary to pinpoint expenditure for the purposes of disallowance on the basis of material on record and to prove that the appellant has ill fact incurred expenditure which has relation to the exempted income and only the expenditure which is proved to have a nexus with the exempt income can be disallowed,

4. Each of the above ground for appeal is independent of the others and without prejudice to the other grounds of appeal. 5. the appellant prays that:- i. the reasonable method of apportioning the expenditure inadmissible under section 14A as determined by the appellant be accepted. ii. without prejudice to what is stated above that the disallowance u/s 14A applies only to section 14A and not to section 115JB and be deleted.

3. The brief facts of the case are that the assessee company is a registered non banking finance company with the RBI, with the main object of investments in various class of assets. The assessee has filed its return of income for the AY 2014-15 on 28/11/2014, declaring total income of Rs.19,14,55,330/- under normal provision of the Income Tax Act, 1961 and book profit of Rs.36,21,57,865/- under the provision of section 115JB of the I.T.Act, 1961. The case was selected for scrutiny and the assessment has been completed u/s 143(3) of the I.T.Act, 1961,determining the total income at Rs.21,21,03,403/- under the normal provision of the I.T.Act, 1961, by making additions towards disallowances of expenditure incurred in relation to exempt income u/s 14A by invoking Rule 8D of I.T.Rules 1962. The Ld. AO has also recomputed book profit u/s 115JB of the I.T.Act 1961 by making additions towards disallowances of expenditure u/s 14A of the I.T.Act 1961.

4. The assessee carried the matter in appeal before the first appellate authority. The Ld.CIT(A), for the detailed reasons recorded in his appellate order, dated 31/08/2018, dismissed appeal filed by the assessee, where he has affirmed the findings of the Ld.AO by following his predecessor appellate order for AY 2013-14. Aggrieved by the Ld.CIT(A) order, the assessee is in appeal before us.

8. We have considered rival submissions and perused the material on record. Though there is no dispute that during the year under consideration, the assessee had earned both taxable as well as exempt income, however, fact remains, the total expenditure claimed by the assessee in respect of all sources income earned during the year is Rs.6.71 lakh. Even out of the said amount, the assessee has further disallowed Rs.2,02,688, under section 14A, towards earning of exempt income. The aforesaid disallowance was made by the assessee on proportionate basis keeping in view the quantum of taxable income and exempt income earned during the year. It is also evident, assessee had been following the aforesaid methodology of apportioning expenditure between the taxable and exempt income from the past several years and accepting the methodology adopted by the assessee, the Tribunal while deciding the issue in assessment year 2008–09 in ITA no.7598/Mum./2011, dated 22nd January 2014, has directed the Assessing Officer to restrict the disallowance to the amount already disallowed by the assessee voluntarily. The same view was expressed by the Tribunal while deciding assessee’s appeals in assessment years

2010–11, vide ITA no. 7135/Mum./2013 &Ors., dated 22nd April 2016 and in the assessment year 2011–12, vide ITA no.5467/Mum./2014 & Anr., dated 17th March 2016. Pertinently, the aforesaid decisions of the Tribunal have been upheld by the Hon'ble Jurisdictional High Court vide order dated 3rd June 2019 while dismissing the appeals filed by the Revenue. In any case of the matter, the disallowance made by the Assessing Officer is far in excess of the total expenditure claimed by the assessee. Therefore, under no circumstances, the disallowance made by the Assessing Officer could have been sustained. Therefore, following the decisions of the Tribunal and the Hon'ble Jurisdictional High Court in the preceding assessment years, as referred to above, we hold that the disallowance under section 14A r/w rule 8D, should be restricted to the amount already disallowed by the assessee under section 14A of the Act. The grounds raised by the assessee are allowed and those of the Revenue are dismissed.

Order pronounced in the open court on this: 02/12/2019