ACG ARTS & PROPERTIES P. LTD,MUMBAI vs. ASST CIT CEN CIR 42, MUMBAI

Appellant by Shri Manish V. Shah, AR Respondent by Shri MC Omi Ningshen, DR Date of Hearing: 07/02/2017 Date of Order: 15/02/2017

O R D E R Per AshwaniTaneja, AM:

This appeal has been filed by the assessee against the order of Commissioner of Income Tax (hereinafter referred as ‘Ld.

CIT(A)’)Mumbai-38, dated 27/11/2013 passed against the assessment order of the Assessing Officer (in short ‘AO’) u/s 143 (3) dated 30/01/2011 for AY 2009-10 on the following grounds . “ Ground I

1. On the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) – 38, Mumbai (“CIT(A)”) erred in upholding the order of the Assistant Commissioner of Income Tax, Central Circle 42, Mumbai (“AO”) in making addition of Rs. 9,33,311/- u/s 14A against Dividend Income earned Rs. 3,07,126/- as per Rule 8D. In absence of expenses directly or indirectly relatable to earning Income 14-A addition cannot be made.

2. This has been reflected by the auditor in the Tax Audit Report Clause 17(I).

3. The appellant therefore, prays that the A.O. be directed to delete 14A Addition. Ground II

1. Without prejudice to Ground No.1 if any disallowance were to be made following Rule 8D only shares & mutual fund on which dividend was received is to be consider.

2. The appellant therefore prays that the A.O. directed to consider only shares & mutual Fund on which dividend was received for the purpose of Rule *D. Ground III The appellant craves its leave to add to, alter, modify, delete all/or any of the Grounds of Appeal.”

2.The solitary issue raised in this appeal is with respect to disallowance made u/s 14A. During the course of hearing it was stated by the Ld. Counsel of the Assessee that the disallowance u/s 14A has been made by the AO and confirmed by the Ld. CIT(A) without considering the point that investment made by the assessee in tax free securities comprise substantial amount of investment made in the group companies for strategic reasons. Therefore, limited prayer of the assessee is that for making disallowance u/s 14A, this strategic investment should be excluded and disallowance can be made only on the balance amount of investment. In support of his argument he placed reliance upon the judgement of Hon’ble Delhi High Court in the case of Cheminvest vs. CIT 378 ITR 33 and judgement of Mumbai Bench of Tribunal in the case of J.M. Financial Consultants Private Ltd. vs. DCIT (ITA No. 1863/M/2013 and Kotak Mahindra Capital Company Ltd vs. DCIT (ITA No. 5748 and 248 of 2012) (Mum. Trib). Per contra Ld. DR relied upon the order of Lower Authorities.

3.We have considered the submissions made by the Ld. Counsel before us and find that this issue has been decided in favour of the assessee in the judgements relied upon before us. Therefore, accepting the request of the assessee, we send this issue back to the file of AO for giving opportunity to the assessee to submit details of strategic investments. The Assessee shall place on record requisite details to satisfy the AO about the strategic investment. The AO shall exclude the amount of strategic investments and the disallowance u/s 14A shall be made on the balance amount of investment.

4.As a result, appeal filed by the assessee is partly allowed.

Order was pronounced in the open court at the conclusion of the hearing.