TaxTMI 
TaxTMI 
TaxTMI 
2026 (1) TMI 1187
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.... of paper book). 2. For the Assessment Year ('AY') 2017-18, the Appellant filed its return of income on October 23, 2017, declaring total income at Rs. 19,67,980. Thereafter, the case was selected for scrutiny assessment and the Assessing Officer ('AO') vide order dated June 27, 2019, passed under section 143(3) of the Act, computed the assessed income at Rs. 36,91,080, making an addition of Rs. 17,23,096 under section 14A r.w.r 8D of the Act. 3. Being aggrieved by the order of the AO, the Appellant preferred an appeal before the CIT(A). The CIT(A) vide the impugned order dated July 25, 2024, upheld the order of the AO and dismissed the appeal. Being aggrieved by the order of the CIT(A), the Appellant preferred this appeal before Your Honour. Proposition in brief A. Disallowance under section 14A - Rs. 17,23,096 4. During the year under consideration, the Appellant earned dividend income of Rs. 11,93,263 from investments made in mutual funds, held as stock-in-trade. The details of mutual funds from which such dividend was earned is appended herewith as Annexure 1. For earning the above dividend income, no direct expenses ....
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....ance is placed upon the decision of coordinate bench in case of Infina Finance Private Limited v. ACIT (ITA Nos. 413, 414, 415, 416/Mum/2025, order dated October 16, 2024) (refer page nos. 18 to 27 of the paper book), wherein the Hon'ble Mumbai Tribunal held as follows: "10. In light of the aforementioned decisions of the Hon'ble Supreme Court, Hon'ble High Courts and Co-ordinate bench, we direct the AO to exclude the shares held as stock-in-trade for the purpose of computation of disallowance u/s 14A of the Act and recompute the disallowance. 11. Further we find that the Special Bench in the case of Vireet Investments (supra) has held that only those investment have to be considered which yield exempt income, therefore, respectfully following the same, we direct the AO to consider only those investments for the purpose of disallowance u/s 14A r.w.r. 8D which yielded exempt income." 11. In the decision of Infina Finance Private Limited (supra), the Hon'ble Tribunal has relied on the below case laws and held that shares held as stock in trade are to be excluded for the purpose of computing disallowance under section 14A: a. Maxopp ....
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....come of the assessee assessed and computed thereby making addition of Rs. 17,23,096/- u/s 14A r.w.r 8D of the Act. Although it was submitted by Ld. AR that no disallowance u/s 14A was warranted on account of the fact that during the year under consideration assessee had earned dividend income of Rs. 11,93,263/- from investments made in mutual funds held as "stock-in-trade" and the details of mutual funds from which such dividend earned has already placed on record as annexure - 1 in paper book. It was further submitted that earning the above dividend income no direct expenses were incurred by the assessee, hence no suo-moto disallowance u/s 14A was made by the assessee. 4. Whereas on the contrary, Ld. DR submitted that while computing the disallowance under Rule 8D(ii) the AO took the value of investments for computing the average investment as Rs. 27,86,26,701/- and had made the disallowance by holding that the provisions of Sec. 14A are applicable if no direct expenses are incurred to earn the exempt income and computed the disallowance in the following manner. Particulars Amount C) The amount of expenditure directly relating to income which does not form part of tota....
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....back to the file of lower authorities for considering these arguments on facts and on merits. Further it is to humbly state that these submissions are in addition to the order of AO and CIT(A) and oral arguments during the hearings and may kindly be taken on record and favourably considered while deciding the case. 6. After having gone through the facts as well as legal proposition in the present case, I find that according to the assessee since the assessee had earned dividend income of Rs. 11,93,263/- from investments made in mutual funds, held as stock in trade, therefore no disallowance needs to be made u/s 14A r.w.r 8D of the Act. And further submitted that only those investments yielding exempt income are to be considered for computing disallowance under Rule 8D(2)(ii). After having gone through the facts of the present case, I find that the Coordinate Bench of ITAT in the case of Infina Finance Pvt Ltd Vs. ACIT (ITA Nos. 413, 414, 415 416/Mum/2025), wherein it has held as under: "10. In light of the aforementioned decisions of the Hon'ble Supreme Court, Hon'ble High Courts and Co-ordinate bench, we direct the AO to exclude the shares held as stock-in-trad....