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of <h1>Revenue's Appeal Dismissed on Section 14A for AY 2015-16: CIT(A) Ruling Upheld (A) -16</h1> <h3>DCIT, Central Circle-3 (3), Mumbai. Versus Mentor Capital Ltd.</h3> The Revenue appealed against the deletion of an addition of Rs. 2,93,38,160/- by the CIT(A) under section 14A r.w.r 8D(2)(ii) for the assessment year ... Addition u/s 14A r.w.r. 8D - CIT-A deleted the addition - whether assessee’s case is not covered by the ratio of case of HDFC Bank [2014 (8) TMI 119 - BOMBAY HIGH COURT] and Reliance Utilities [2009 (1) TMI 4 - BOMBAY HIGH COURT]? - HELD THAT:- We observe that in this case the ld. CIT(A) has recorded a finding of fact that assessee’s own funds are far more than the investments in the securities and therefore no disallowance is called for in pursuant to the decision in the case of HDFC Bank (supra). Accordingly, we are inclined to uphold the order of CIT(A) on this issue by sustaining the appeal of the Revenue. - Decided against revenue. Issues:- Deletion of addition under section 14A r.w.r 8D(2)(ii) by CIT(A)Analysis:The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) relevant to the assessment year 2015-16. The main issue raised by the Revenue was the deletion of addition of Rs. 2,93,38,160/- by the CIT(A) under section 14A r.w.r 8D(2)(ii). The Revenue argued that the assessee's case did not fall under the ratio of a Bombay High Court decision related to HDFC Bank and Reliance Utilities.The assessee had earned exempt income during the year and had made a suo motto disallowance under section 14A of the Act r.w.r. 8D of Income Tax Rules amounting to Rs. 187,14,283/-. The Assessing Officer (AO) called upon the assessee to provide the working of the disallowance and show cause as to why section 14A r.w.r 8D should not be applied. The AO concluded that as no books of accounts were maintained regarding investments, there was no direct correlation between expenses and exempt income. Consequently, the disallowance was recalculated at Rs. 4,80,52,443/-, with Rs. 2,93,38,160/- under Rule 8D(2)(ii) and Rs. 187,14,283/- under Rule 8D(2)(iii). The AO added back Rs. 2,93,38,160/- after considering the suo motto disallowance.In the appellate proceedings, the CIT(A) partially allowed the appeal by relying on the decision of the jurisdictional High Court in the HDFC Bank case and concluded that no disallowance under Rule 8D(2)(ii) was necessary as the assessee had more own funds than the investments generating exempt income. However, the disallowance under Rule 8D(2)(iii) was confirmed.Upon reviewing the facts and arguments from both parties, the Appellate Tribunal observed that the CIT(A) had correctly determined that the assessee's own funds exceeded the investments in securities, thereby justifying the decision based on the HDFC Bank case. Consequently, the Tribunal upheld the CIT(A)'s order on this issue, resulting in the dismissal of the Revenue's appeal. The order was pronounced on 29.01.2020.
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