BUSINESS MATCH SERVICES (I) P.LTD,MUMBAI vs. ACIT 9(1), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order,dated 28/09/2015,of the CIT(A)-20,Mumbai,the Assessee has filed the present appeal.The assessee is a private limited company engaged in the business of consultancy service for private placement of shares with foreign institutional investors, financial institutions, strategic investments, arranging loans and also advising on insurance business.It filed its return on 15/10/2010 declaring total income at Rs.6,01,32,801/-.Later on a revised return of income was filed on 30/03/2012,declaring total income at Rs.5,99,14,818/-. The Assessing Officer(AO)completed the assessment on 11/01/2013, u/s. 143 (3) of the Act, determining the income of the assessee at Rs.6.23 crores. 2.First Ground of appeal is about disallowance made u/s. 14A r.w. Rule 8D of the Rules, 1962(Rules).During the assessment proceedings the AO found that the assessee had credited dividend income of Rs.71.07 lakhs in its P&L account, that the same was claimed as exempt, that it had disallowed Rs.9.59 lakhs against such dividend income in terms of section 14A. Referring to the judgment of Godrej and Boyce Manufacturing Co.Ltd. (ITA No.626 of 2010) he made a disallowance of Rs.34,36,219/-.As the assessee had,on its own ,already disallowed Rs.9,59,753/-,therefore, he added the balance amount i.e. Rs. 24.76 lakhs to the income of the assessee. 2.1.Aggrieved by the order of the AO he preferred an appeal before the First Appellate Authority(FAA)and made detailed submissions. After considering the available material,he

216/M/16-M/s. Business Match Services(I) Pvt.Ltd. held that the assessee was trading in shares, that expenses such as legal and professional fee, business promotion expenses did not have direct nexus with earning of tax exempt income, that apart from the investment made in the assets generating exempt income, the assessee had made investment in painting,sculptures, that such investments were to be taken out of working of 14A disallowance. Accordingly he directed AO to rework the disallowance u/s. 14A.

2.2.During the course of hearing before us,the Authorised Representative(AR)stated that assessee had made disallowance of Rs.9.59 lakhs on its own, that 20% of the expenses directly related with the investments were disallowed, that the AO had not recorded dissatis - faction about calculation made by the assessee,that there was no direct nexus between administrative and other expenses incurred by the assessee and the exempt income earned by it.The AR relied upon the cases of Vireet Investments (P) Ltd. (154DTR241); and ACB India Ltd.(374ITR18). The Departmental Representative(DR) supported the order of the AO.

2.3.We have heard the rival submissions and perused the material before us. We find that the assessee had on its own made disallowance of Rs.9,59,753/- u/s.14A r.w.r. 8D of the Rules, that the AO had applied the Rule 8D mechanically without pointing out any defect/ shortcoming in the calculation made by the assessee,that the FAA had partly allowed the appeal of the assessee.The basic reason for introducing section 14A of the Act was to discourage the tendency of some of the assessee to claim double deduction i.e. claiming exempt income on one hand and booking expenditure against such income on the other .The assessee,in the case under consideration, had disallowed 1/5th of the expenses directly related with earning of exempt income. The FAA had given a categorical finding of fact that while calculating disallowance,the AO had included the investments that were not generating exempt income like investment made in property, painting and sculptors.It is also found that the assessee had already disallowed the DMAT charges while computing the total income of the assessee.In our opinion,the provisions of Rule 8D cannot be applied mechanically especially without rejecting the disallowance made by the assessee.Considering the peculiar facts and circumstances of the case,we are of the opinion that disallowance made by the assessee is fair and reasonable and there was no need to make further disallowance. First Ground of appeal is decided in favour of the assessee.

216/M/16-M/s. Business Match Services(I) Pvt.Ltd.

3.Second effective Ground of appeal is about confirming the addition of expenditure of Rs.24.76 lakhs,while calculating book profit u/s. 115JB of the Act. 3.1.It was brought to our notice that the issue stands settled by the order of the Special Bench of the Tribunal delivered in the case of Vireet Investments (supra).Respectfully, following the above judgment,we allow the second ground of appeal.