HPL MERCANTILE PVT LTD,DELHI vs. ITO WARD 11(1), DELHI

Learned counsel vehemently submits during the course of hearing that both the learned lower authorities have erred in law and on facts in invoking section 14A r.w. rule 8D(2)(iii) disallowances of Rs.36,84,834/- relating to the assessee’s exempt income from dividends amounting to Rs.23,67,926/-; in assessment order dated 20.12.2019 as upheld in the lower appellate discussion.

Learned counsel’s first and foremost argument in this factual backdrop is that both the lower authorities have nowhere recorded any specific satisfaction qua the assessee’s books of account which is mandatory in nature under section 14A(2) of the Act. He could hardly dispute that the assessee had not declared any expenditure in its books of account so as to justify the same before the learned lower authorities. The assessee’s instant first and foremost legal argument is rejected therefore.

Learned counsel’s second legal argument is that the assessee has not incurred any expenditure for the purposes of deriving the impugned exempt income; and, therefore, the administrative expenditure amount disallowed herein is not sustainable in law. This tribunal finds no merit in the assessee’s instant second argument as well in light of Maxopp Investment Ltd. Vs. CIT (2018) 402 ITR 640 (SC) that the impugned computation comes into play

Lastly comes the third important aspect of quantification of the impugned disallowance itself. The Revenue could hardly dispute that the case law Joint Investment Pvt. Ltd. Vs. CIT (2015) 372 ITR 694 (Del) has already settled the issue in the assessee’s favour that the impugned disallowance could not exceed the amount of exempt income itself. That being the case, I hereby direct the learned Assessing Officer to restrict the impugned disallowance to the extent of the assessee’s exempt income of Rs.23,67,926/- only. Necessary computation shall follow as per law. No other ground or argument has been pressed before us.