BANG SECURITIES P.LTD,MUMBAI vs. DCIT 2(1), MUMBAI

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ITA 5835/MUM/2014Status: DisposedITAT Mumbai07 April 2017AY 2010-112 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the disallowance under Section 14A cannot exceed the total expenses in the Profit & Loss account. The AO was directed to re-compute the disallowance after considering existing decisions and providing an opportunity of being heard to the assessee.

What were the facts?

The assessee claimed a suo motu disallowance of Rs. 19,92,304/- under Section 14A. The Assessing Officer (AO) made a net addition of Rs. 70,15,752/- under Section 14A read with Section 115JB, which was higher than the total debits in the Profit & Loss account.

What were the issues?

Whether the disallowance under Section 14A can exceed the total expenses in the P&L account, and whether the AO properly considered the assessee's suo motu disallowance and relevant legal propositions.

Which sections of the Income-tax Act were involved?

Section 14A,Section 115JB

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, MUMBAI

For Appellant: Ms. Dinkal Hariya
Hearing: 15.03.2017Pronounced: 07.04.2017

O R D E R

PER D. KARUNAKARA RAO, AM:

1.

This appeal filed by the assessee on 17.9.2014 is against the order of the CIT (A)-4, Mumbai dated 17.7.2014 for the AY 2010-2011.

2.

The only issue raised in this appeal relates to the net addition of Rs. 70,15,752/- (ie Rs. 90,08,056 – Rs. 19,92,304/-) u/s 14A r.w.s 115JB of the Act. 3. Before us, without insisting on the issue of making addition u/s 14A when assessment is made u/s 115JB of the Act, Ld Counsel for the assessee submitted that the assessee suo motto quantified the disallowance at Rs. 19,92,304/- u/s 14A f the Act. Further stating that the assessee earned dividend income of Rs. 58,95,101/- Ld Counsel for the assessee submitted that the total debit in the P & L Account works out to Rs. 41,70,492/-. The disallowance @ Rs. 90,08,056/- u/s 14A is much higher than the total debits to P & L Account. AO ignored the suo motto disallowances on account of STT payments of Rs. 21,51,865/-. 4. After hearing the above submissions of the assessee and the also the Ld DR for the Revenue, we find that the grounds raised

in the appeal should be remanded for reworking of the disallowable sum u/s 14A of the Act. AO is directed to consider the existing decisions on the issue and hear the assessee before making any disallowance u/s 14A r.w.s 115JB of the Act. It is a settled legal proposition that “average investment” needs to be adjusted under certain peculiar facts and the disallowance u/s 14A r.w. Rule 8D of the IT Rules, 1962 may not exceed the total claim of expenses in the P & L Account. AO shall re-compute the disallowance after granting a reasonable opportunity of being heard to the assessee as per the set principles of natural justice. Accordingly grounds raised by the assessee are allowed for statistical purposes.

5. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court of 07th April, 2017.

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