HINCON FINANCE LTD,MUMBAI vs. DCIT 10(1), MUMBAI

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ITA 5853/MUM/2014Status: DisposedITAT Mumbai11 May 2016AY 2010-113 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that a co-ordinate bench had previously restored a similar issue to the Assessing Officer for re-computation. The Tribunal followed this precedent, directing the AO to re-examine the disallowance.

What were the facts?

The assessee's appeal concerned a disallowance made under Section 14A of the Income Tax Act, computed using Rule 8D. The disallowance included administrative expenses calculated as 0.5% of the average investment value.

What were the issues?

The primary issue was whether strategic investments should be excluded when computing the average value of investments for disallowance under Section 14A. The Tribunal also considered the AO's method of computation under Rule 8D.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES “H”, MUMBAI

Before: SHRI B.R.BASKARAN (AM) & SHRI RAM LAL NEGI (JM)

For Appellant: Shri. Abbasi Kapasi
For Respondent: Shri. Siddarth B.S.Meena
Hearing: 10/05/2016Pronounced: 11/05/2016

The appeal filed by the assessee is directed against order dt. 17/07/2014 passed by the Ld. CIT(Appeals)-21, Mumbai for the assessment year 2010-11.

2.

The only issue to be decided in this appeal relates to disallowance made u/s 14A of the Act.

3.

The Ld. AR submitted that the AO has computed disallowance made u/s 14A of the Act by following Rule 8D of the I.T Rules. The disallowance was made under Rule 8D(2)(iii) for administrative expenses computed @ 0.5% of the average value of investment.

4.

The Ld. AR submitted that the inadmissible portfolio Management fees of the assessee includes strategic investment made in the group companies. He submitted that the co-ordinate bench of the Tribunal, in the case of M/s. J.M.Financial Ltd. (ITA No. 4521/M/2012) and Gareware Wall Ropes Ltd. (ITA No. 5408/M/2012), has held that the strategic investment is to be excluded for computing of average value of investment.

5.

The Ld. AR further, submitted that the identical issue has been considered by the co-ordinate bench of the Tribunal, in assessee’s own case relating to Asst. year 2009-10 and the Tribunal, vide its order dt. 17/10/2014 passed in has restored the matter to the file of the Assessing Officer for re-computing the disallowance.

6.

We heard the Ld. DR and perused the record, we notice that the identical issue has been restored to the file of the AO for considering the plea of the assessee that the investment made in the shares of Hindustan Construction Company is a strategic investment and also to recompute disallowance u/s 14A in the light of the decision rendered by the Tribunal (supra).

7.

Consistent with the view taken by the co-ordinate bench in the A.Y. 2009- 10, we set aside the order of the Ld. CIT(A) and restore this issue to the file of the AO with the direction to examine the same afresh in accordance with the directions issued by the co-ordinate bench in A.Y. 2009-10.

8.

In the result the appeal of the assessee for the A.Y. 2010-11 is treated as allowed for statistical purpose.

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