TaxTMI 
TaxTMI 
2018 (4) TMI 508
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.... Revenue is in further appeal before us against the order of CIT(A) deleting the addition made by AO on account of amount received under the head 'penalty'. We found that similar issue has been decided by the Tribunal in assessee's own case in ITA No.1423/Mum/2011 order dated 09/08/2017 The precise observation of the Tribunal was as under:- 7. We have heard the rival contentions on this issue and perused the record. We noticed that the learned CIT(A) deleted the addition with the following observations :- 3.3. I have considered the facts of the case. The appellant credited an amount of Rs. 5.08 crores in the P&L account on account of penalty amount collected from the members. The appellant thereafter transferred this amount from P&L account to Investors Protection Fund account. During assessment proceedings, the appellant furnished its reply alongwith guidelines issued by Forward Market Commission. The A.O. has treated the penalty amount of Rs. 5.08 crores collected by appellant, as income of the appellant stating that no explanation was furnished in respect of reduction of such income credited to P&L account. However, in the assessment order the A.O. has discusse....
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....ion of the Tribunal consistently taken in the case of assessee for the A.Y.2007-08 to 2010-11, we do not find any merit for the addition made by the AO. However, from the record, we observe that till the end of Financial Year under consideration, the assessee has not created the investor protection fund as per requirement of Forward Market Commission (FMC). It also appears that the money so collected was shown as liability in assessee's balance sheet. It also appears that assessee has invested this money in mutual funds for earning some income. Since the investor protection fund has still not been created, it is not clear as to whether the income generated on such investment of fund by the assessee having been offered to tax either in the hands of assessee or in the hands of the fund. AO is directed the verify the same and decide as per law after giving due opportunity to the assessee. 6. In the assessee's appeal, assessee is aggrieved for disallowance made by AO u/s.14A r.w.Rule 8D 2(iii) amounting to Rs. 55,94,708/-. 7. Rival contentions have been heard and record perused. Facts in brief are that during the captioned year, assessee company earned dividend income of Rs. 8,17....
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....r than the percentage of disallowance determined by the Hon'ble tribunal for the AY 2008-09. Therefore, in light of the said facts it was argued that the disallowance made by the assessee is reasonable and no further disallowance is warranted in this year. 11. Further, reliance is also placed on the decision of Hon'ble Coordinate bench in the case of National Securities Clearing Corporation Ltd. for the AY 2008-09 and 2009-10 wherein after considering the similar nature of transactions of investments made in mutual funds, the Hon'ble Coordinate Bench directed the Id.AO to restrict the disallowance to 1% of the exempt income. Copy of the said ITAT order was furnished, as Annexure 2. 12. On the other hand, learned DR relied on the order of the AO and the CIT(A) and contended that relevant assessment year under consideration is 2011-12, therefore, Rule 8D is clearly applicable and AO has correctly computed disallowance in respect of expenditure incurred for earning exempt income as per formula given under Rule 8D(2)(iii) of the IT Act. 13. We have considered rival contentions and carefully gone through the orders of the authorities below. We had also perused the o....
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....sideration. Hence, on a conspectus of the matter, we are of the view that the disallowance u/r 8D(2)(iii) may be determined at Rs. 20.00 lakhs and in our view, the same would meet the requirements of sec. 14A. Accordingly we modify the order passed by Ld CIT(A) on this issue and direct the AO to restrict the disallowance u/s 14A to Rs. 20.00 lakhs." 11. In the A.Y.2009-10, the Tribunal held as under:- "26. We have heard the parties on this issue. The Ld A.R strongly contended that there is no requirement of making any disallowance under Rule 8D(2)(ii) out of interest expenditure, as the assessee has not used any borrowed funds for making investments. He also relied upon the decision rendered by the Hon'ble Bombay High Court in the case of HDFC Bank Limited (383 ITR 529). The assessee has pointed out that the loan funds have been used for specific purposes. We notice that the Ld CIT(A) has not applied the ratio of the decision rendered by Hon'ble Bombay High Court. With regard to the disallowance made under Rule 8D(2)(iii) also, we notice that the assessee has mainly invested in units of mutual fund units, which fact has not been considered by the tax authorities....