Loading judgment…
No AI summary yet for this case.
Order PER VIKRAM SINGH YADAV, A.M. : The present appeal has been filed by the Assessee against the order of the Ld. CIT(A)/ NFAC, Delhi dt. 02/08/2024 pertaining to Assessment Year 2022-23. 2. In the present appeal, the assessee has raised the following grounds of appeal:
“1. That Ld. CIT(A)/ National Faceless Appeal Centre (NFAC) erred in law and on facts in not deleting the addition of Rs.80,33,8607- wrongly made by AO u/s 14A r.w.r 8D on the dividend income which was not exempt during the year but taxable and tax was paid by the appellant on the dividend income as per law relevant to the year.
Directions be given to delete the addition made u/s 14A by applying Rule 8D which was not applicable in the case of assessee because dividend income was not exempt during the year as per amended provision. 2. That the appellant craves, leave to add, amend, alter, modify or substitute all or any of the above mentioned grounds of appeal before the appeal is finally heard and disposed off.”
3. Briefly the facts of the case are that the case of the assessee was selected for compulsory scrutiny to examine expenditure incurred in relation to income not included in total income and applicability of Section 14A of the Act. Thereafter, notices under section 143(2) and 142(1) of the Act were issued calling for necessary information/documentation and explanation from the assessee which was considered but not found acceptable. As per AO, the assessee has made substantial investment in shares of company and income on such investment is prima facie exempt from tax and not includable in the taxable income. Therefore, the provisions of Section 14A are attracted. It was further stated by the AO that he is not satisfied with the correctness of the claim of the assessee that no expenditure have been incurred in relation to the exempt income and invoking provisions of Rule 8D, he worked out the amount of disallowance at Rs. 80,33,860/- which has since been confirmed by the Ld. CIT(A) and against the said findings, the assessee is in appeal before us.
During the course of hearing, the Ld. AR submitted that the assessee filed its return of income declaring total income of Rs. 1.51 Crores which include dividend income of Rs. 20.50 lacs received from the investment made by the assessee company in earlier years. It was submitted that under the amended law as applicable for the impugned assessment year, the dividend income was no more exempt under section 10(34) of the Act, hence the assessee while filing its return of income has declared the dividend income of Rs. 20.50 lacs as part of taxable income and such dividend income has not been claimed as exempt under any provision of the Act. It was accordingly submitted that where the dividend income so received on investment has already been offered to tax in the return of income and not been claimed as exempt, the question of invocation of Section 14A of r.w. Rule 8D does not arise at first place. It was submitted that the fact that the dividend income has been duly offered as part of the return of income has not been disputed by either the AO or by the Ld. CIT(A), however under the mistaken understanding of the provision of Section 14A r.w. Rule 8D read with the explanation thereto, the said provision have still been invoked and disallowance have been made to the tune of Rs. 80,33,860/-. It was accordingly submitted that the disallowance so made be directed to be deleted.
Per contra the Ld. DR is heard who has relied on the order of the lower authorities. It was submitted that on perusal of the assessee’s financial statements, it can be seen that the assessee has made substantial investment in shares of the company wherein the opening balance is Rs. 80,24,21,718/- and the closing balance is Rs 82,51,71,718/- and income on investment in share was prima facie exempt from tax and hence not includable in the taxable income thus attract the provision of Section 14A of the Act. It was further submitted that the AO was not satisfied with the correctness of the claim of the assessee having regard to the account of the assessee and hence Rule 8D was invoked to compute the amount of disallowance under Section 14A of the Act read with explanation thereto. At the same time, it was fairly admitted by the Ld DR that the assessee has received dividend income of Rs. 20.50 lacs and taxes thereon has been paid and the same has been duly offered as part of the return of income by the assessee and not been claimed as exempt in the return of income.