VEENA INVESTMENT P.LTD,MUMBAI vs. DCIT CIR 7(3), MUMBAI

The only issue raised by the assessee in this appeal is against the confirmation of disallowance to the tune of `3,49,95,420/- by CIT(A) under Section 14A of the Act r.w. Rule 8D as against the disallowance made by the AO of `23,18,53,471/-.

The brief facts of the case are that the assessee was carrying on trading business in equity shares and holding the unsold equity shares as stock in trade and also as investment. During the year the assessee received dividend income of Rs. 3,49,95,420/- which was claimed as exempt. The assessee has also incurred huge amount of interest expenditure Rs. `25,65,22,810/- as compared to Rs. 1,74,65,541/- in the immediately preceding previous year. The assessee suo moto disallowed a sum of Rs. 43,32,240/- in the computation of income while filing the M/s. Veena Investment P. Ltd. return of income. Before the AO, the assessee submitted that substantial investments were made in the group companies from strategic point of view. Vide written submission dated 21.01.2014 the assessee submitted before the AO that no disallowance of interest is called for as the assessee is engaged in the business of trading in securities and shares and therefore all these investments were made in the normal course of business from strategic point of view. However, the AO was not convinced with the contentions of the assessee and accordingly calculated the disallowance at Rs. 25,22,18,697/- comprising Rs. 23,18,53,471/- under Rule 8D(2)(ii) and `2,03,65,226/- under Rule 8D(2)(iii) and after allowing credit of suo motto disallowance of Rs. 43,32,240/- the net disallowance was worked out at `24,78,86,457/-. In the appellate proceedings the CIT(A) partially allowed the view of the assessee and restricted the disallowance to `3,49,95,420/- equal to the amount of dividend income received during the year. The assessee, still aggrieved by the order of the CIT(A), preferred an appeal before the Tribunal.

The learned A.R. at the outset submitted before the Bench that the case of the assessee is fully covered by the order of the Coordinate Bench in assessee’s own case in for A.Y. 2009-10 dated 17.12.2015 wherein similar issue has been allowed for statistical purposes by issuing directions to decide the same on the lines of the decisions of the Coordinate Benches in the case of J.M. Financial Ltd. vs. ACIT in ITA No. 4521/Mum/2012, Garware Wall Ropes Ltd. vs. DCIT 65 SOT 86 and Kotak Mahindra Capital Co. Ltd. vs. DCIT in ITA No. 5748/Mum/2012. The learned A.R. prayed before the Bench that since the entire investments were made from strategic point of view, no disallowance can be made on the said investments in the group companies. Moreover no disallowance under Section 14A can be made if shares are held as stock in trade and therefore prayed to decide the current appeal on the same lines as in A.Y. 2009-10.

The learned D.R., on the other hand, relied on the decision of the learned CIT(A) and requested the Bench to confirm the same.

We heard the rival submissions and perused the material on record. On perusal of the facts of the present appeal vis-a-vis the decision of the Coordinate Bench in for A.Y. 2009-10 we observe that the issue in the current year stands as resolved by the decision of the Coordinate Bench in the above mentioned case and therefore the same should be followed in the current year also to maintain consistency with the said decision. Accordingly we restore the issue back to the file of the AO with the direction to decide the same by following the decision of the Coordinate Bench in ITA No. 1252/Mum/2013.

In the result, the appeal filed by the assessee is allowed for statistical purposes.