2025 (11) TMI 45

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.... appeal is the disallowance made under section 14A of the Income Tax Act, 1961 ('Act') read with rule 8D of the Income Tax Rules, 1962. 3. The relevant facts giving rise to this appeal are that the assessee, a distributor of PNG and CNG, filed its Income Tax Return ('ITR') of the relevant year on 23.10.2018 declaring income of Rs. 914,49,87,010/-. The case was picked up for scrutiny. Consequential scrutiny assessment was completed at income of Rs. 927,94,09,651/-; wherein the Ld. Assessing Officer ('AO') disallowed the claim of (i) additional depreciation of Rs. 9,78,36,988/- under Section 32(1)(iia) of the Act and (ii) expenditure of Rs. 3,65,85,683/- under Section 14A of the Act. Aggrieved, the assessee filed appeal before the Ld. CIT(....

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..... It was specifically submitted that no fresh investment had been made during the relevant year. Further, it was also submitted that the appellant assessee had not claimed any exclusive expenditure in its Profit & Loss Account for earning the exempted income. However, the assessee had made suo-moto disallowance of Rs. 25,84,720/- in the ITR in accordance with section 14A of the Act read with Rule 8D of the Income Tax Rules. The Ld. AR explained the working of suo-moto disallowance of Rs. 25,84,720/-. 4.1 The Ld. AR further submitted that the Ld. AO had given the finding that investments had been made after quite intensive market research. However, in absence of any fresh investment made during the year, this finding had no relevance at a....

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....Rule 8D read with section 14A of the Act. However, we do not find the said satisfaction sufficient for rejecting the assessee's working of disallowance particularly when the assessee has not made any fresh investment during the relevant year and the assessee's exempted income consists of market gain on growth of mutual fund and dividend income from the associate companies. The amount of expenditure in relation to exempt income has two aspects - (i) direct and (ii) indirect. The direct expenditure is straightaway taken into account by virtue Rule 8D(2)(i) of the Income Tax Rules. The indirect expenditure has to be considered as per Rule 8D(2)(ii) of the Income Tax Rules. The Rule 8D of the Income Tax Rules comes into effect only when the AO,....