NRC LTD,MUMBAI vs. DCIT (OSD) CIR 2(2), MUMBAI

1. On the facts and in the circumstances of the case and in law the learned Commissioner Of Income tax (Appeals) erred in upholding the disallowance of expense u/s 14-A r.w. rule 8-D of Rs. 2,06,49,075/- 2. The learned Commissioner Of Income tax (Appeals) has ignored the fact that expenditure is incurred in connection with the exempted dividend Income. 3. The learned Commissioner Of Income tax (Appeals) failed to appreciate the fact that investments in shares made by the Appellant company were made out of owned funds and not out of borrowed funds. 4. The learned Commissioner Of Income tax (Appeals) failed to appreciate the fact that interest expenditure on the borrowed funds, utilized otherwise that for the investment in shares, cannot be disallowed u/s 14A B. The reasons assigned for sustaining the additions/disallowance are wrong, insufficient, and contrary to law and facts.

The only issue raised in this appeal relates to applicability u/s 14-A of the Act r.w. rule 8-D, when the assessee has not included any exemption income in the total income returned by the assessee.

At the outset the ld Counsel for the assessee requested that this issue may be remanded to the file of the AO for considering the number of decisions subsequently pronounced by the Tribunals on similar issue. The ld. Counsel filed a copy of the order of the Tribunal in the case of Mr. M. Baskaran, (ITA No.1717/Mds/13 dated 31-07-14) in support of the above contention. It is the counsel’s argument that no disallowance under the said sections is warranted when the exempt income is not included in the total income of the assessee. On hearing both the parties, we find this particular ratio of the decisions were not existing at the relevant point of time, when the orders by the AO and CIT(A) were passed. We accordingly, direct the to examine the facts on the inclusion of the exempt income if any and apply the above cited orders of Tribunal and other judgements if any on the subject. Thus, we remind all the grounds raised by the assessee in the appeal to the file of the AO for afresh adjudication of the issue after granting reasonable opportunity being heard to the assessee.

Accordingly, grounds raised by the assessee are allowed for statistical puposes.