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

Per Bench 1. Aforesaid appeals by revenue for Assessment Year [AY] 2012-13 contest separate orders of Ld. first appellate authority. Since common issues are involved and facts are identical, we dispose-off the same by way of this common order for the sake of convenience & brevity.

3. For these and other grounds that may be urged at the time of hearing the decision of the CIT(A) may be set aside and that of the AO restored.

The assessment for impugned AY was framed by Ld. Assistant Commissioner of Income Tax – Circle 2(1)(1), Mumbai [AO] u/s 143(3) on 23/02/2015 wherein the income of the assessee was assessed at Rs.746.76 Lacs under normal provisions and Rs.1260.50 Lacs for the purpose of Minimum Alternative Tax [MAT] u/s 115JB after certain additions / disallowances as against normal returned income of Rs.379.61 Lacs e-filed by the assessee on 28/09/2012. The income &1159/Mum/2017 DSP Adiko Holding Private Limited & DSP HMK Holdings Private Limited Assessment Years-2012-13 offered u/s 115JB was Rs.893.35 Lacs. As evident from the grounds of appeal

, the only subject matter of the appeal is disallowance u/s14A. During the impugned AY, the assessee being resident corporate assessee was engaged in the business of investment and registered with RBI as Non Banking Finance Company [NBFC].

3. During Assessment proceedings, it was noted that the assessee earned exempt income of Rs. 22.88 crores in the shape of dividend and Long Term Capital Gains which called for disallowance u/s 14A. Against the same, the assessee had made suo-moto disallowance of Rs.6.99 Lacs and defended the same on the strength of Tribunal’s order in earlier years. However, not convinced, Ld. AO, applying Rule 8D, worked out aggregate disallowance of Rs.374.14 Lacs which comprised-off of direct expense disallowance u/r 8D(2)(i) for Rs.0.11 Lacs and indirect expense disallowance u/r 8D(2)(iii) for Rs.374.03 Lacs. After adjusting suo-moto disallowance of Rs.6.99, the net disallowance worked out was Rs.367.15 Lacs which was added to the income of the assessee while arriving at income under normal provisions as well as u/s 115JB.

4. Aggrieved, the assessee contested the same with partial success before Ld. CIT(A) vide impugned order dated 09/11/2016 wherein it was, inter-alia, submitted that the net expenditure as claimed by the assessee was only Rs.12.16 Lacs and therefore, the disallowance, if any, which has to be made is to be restricted to that amount only. The reliance was placed on the decision of this Tribunal, in this regard, for earlier AYs. The matter was concluded by Ld. CIT(A) by making following observations:-

7. Ground No.2 relates to disallowance of Rs.3,67,15,098/- u/s 14A read with Rule 8D of the IT Rules. During the course of assessment proceedings, the &1159/Mum/2017 DSP Adiko Holding Private Limited & DSP HMK Holdings Private Limited Assessment Years-2012-13 AO has observed that the appellant has received dividend on Mutual Funds Rs.22,21,29,894/-, Dividend on Shares Rs.64,67,124/- and Long Term Capital Gains u/s 10(38) Rs.2,17,545/-. The AO has calculated disallowance u/s 14A read with Rule 8D(2)(iii) of Rs.3,74,03,615/- and disallowed an amount of Rs.3,67,15,098/-, after giving relief of Rs.6,99,550/- u/s 14A for which the details and the basis of working has been submitted before the AO. Further, the Hon’ble ITAT ‘D’ Bench in the appellant’s own case for earlier years, has held that the expenditure worked out by the appellant is reasonable to make disallowance u/s 14A red with Rule 8D. Since no further appeal was filed by the Department against the ITAT decision the finding of the ITAT may be accepted. It was further submitted that disallowance under Rule 8D read with Rule 14A (2) cannot exceed the total expenses claimed by the appellant. 7.1 I have carefully considered the rival submissions and facts of the case. Respectfully following the decision of the Hon’ble ITAT ‘D’ Bench in the appellant’s own case and the fact that the mistake in the calculation or correctness of the expenses claimed by the appellant. In view of the same, the disallowance made by the appellant to the extent of Rs.12,16,823/-, is confirmed as disallowed by the appellant on proportionate basis and the balance of Rs.3,54,98,275/-, is deleted. In view of the same, Ground NO.2 is allowed.

Aggrieved, the revenue is in further appeal before us.

DSP HMK Holdings Pvt. Ltd.