TaxTMI 
TaxTMI 
2025 (3) TMI 1219
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....3,08,64,419/- The appellant craves leave to alter, amend or withdraw all or any of the Grounds of Appeal herein or add any further grounds as may be considered necessary and to submit such statements, documents and papers as may be considered necessary either before or during the hearing. 3. The assessee has also raised additional ground, which reads as under:- "That in absence of satisfaction contemplated /s 14A(2) of the Income-tax Act, 1961 read with Rule 8D(1) of Income Tax Rules, 1962, the disallowance as made by the Assessing Officer and sustained by the CIT (Appeals) is arbitrary, unjust and bad in law." 3.1. We find that all the facts relevant for adjudication of the aforesaid additional ground is already on record. The additional ground raised by the assessee is purely legal in nature and goes to the root of the matter. Hence, in view of the decision of the Hon'ble Supreme Court in the case of NTPC Limited vs CIT 229 ITR 383(SC), the additional ground is hereby admitted and taken up for adjudication. 4. Brief facts of the case:- The case was selected for scrutiny under CASS to verify the reason "Expenditure debited to P & L for earning exempt income is ve....
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....nbsp; 4698,86,708 Less dividend received from Dabur India Ltd. 45,50,35.455 ------------------ 97% of Dabur India Ltd. dividend on exempted income 2,98,88,917 Disallowance u/s 14A 9,75,502 Accordingly, the AO asked the assessee to submit complete working of disallowance u/s 14A r.w. Rule 8D. In response to the same, the assessee submitted a revised details of dividend earned, dividend script wise and also revised calculation of disallowance u/s 14A of the Act amounting to Rs. 23,34,064/-. 5.1. The AO further noted that major part of its revenue (75.91% of the total revenue) was fr....
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....under clause (i) of Rule-8(2). Thereafter, the AO disallowed a sum of Rs. 3,08,64,419/- being 1% of the only average of the monthly average of opening and closing balance of the value of the investment under clause (iii) of Rule-8D. Thus, the disallowance worked by the AO was Rs. 3.,65,51,284/- (Rs.56,86,865/- + Rs. 3,08,64,419/-). After taking note of the fact that the assessee had disallowed a sum of Rs. 9,75,502/- in its original return of income, the AO made the balance disallowance of Rs. 3,55,75,782/- (Rs.3,65,75,782 - 9,75,502). 6. Aggrieved with the said order, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) confirmed both disallowances made by the AO. Regarding the disallowance of PMS expenses, the ld. CIT(A) observed that notwithstanding that during the year majority of the dividend has been received from M/s Dabur India in which the assessee is a key promoter but the fact remains that the PMS provider manages the entire portfolio and provides advice with regard to balancing the portfolio and when to purchase and sell shares to ensure a good mix of shares which would promote the interests of the client assessee company. Further, the Ld. CIT(A) no....
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....TR 640 and of the Hon'ble Delhi High Court in the case of HT Media Ltd. vs PCIT 399 ITR 576. Further, the assessee relied upon the following decisions of the Tribunal on the proposition of non-recording of satisfaction as required u/s 14A(2) of the Act and consequently the deletion of the disallowance u/s 14A of the Act: i. Milky Investment and Trading Company vs ACIT (ITA No.5972/Del/2019) dated 28.11.2023 ii. Sh. Chowdry Associates vs ACIT (ITA No.6526/Del/2019) dated 14.09.2023 8.2. Further, it was submitted that Para-4.3 of the assessee's written submission that the disallowance if any required to be made in terms of Rule8D(2)(ii) then it should be restricted to the extent of 1% income yielding shares and relied upon following decisions:- i. ACB India Ltd. vs ACIT 374 ITR 108 (Del.) ii. CIT vs Vireet Investment (P) Ltd. 165 ITD 27 (Del.) 8.3. Regarding the PMS charges paid to two concerns, it was submitted that the assessee earned exempt income amounting to Rs. 1,18,88,480/- under the head Long Term Capital Gain on which STT was paid, whereas in respect of other Long Term Capital Gain on which no STT was paid as well as the Short Term C....
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....n respect of the shares from which dividend income being exempt was earned. Further, in the revised computation, it is seen that (as reproduced by the ld. CIT(A)on page 14 to 22 of his order) that the assessee had computed a sum of Rs. 29,10,250/- at 1% of the annual average of the monthly average opening and closing balance of the value of the investments in respect of the shares from which dividend income being exempt was earned. As per revised computation, the assessee further stated that since it has already disallowed a sum of Rs. 9,75,502/- in its original return of income and therefore further proposed disallowance u/s 14A of the Act was Rs. 25,34,784/- whereas as per the statement noted by AO in the assessment order (para -6.3), such disallowance comes to Rs. 23,34,064/-. Therefore, the AO is directed to reconcile the same and make disallowance after necessary verification as per law restricting the disallowance @ 1% of the annual average of the monthly average opening and closing balance of the value of the investments in respect of the shares from which dividend income being exempt was earned. 9.2. The submission of the assessee regarding its claim that the PMS expense....