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TMI Blog2017 (9) TMI 1285X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The first issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in making disallowance u/s 14A of the Act read with rule 8D of the Income Tax Rules, 1962 ('the Rules'). For this assessee has raised following three grounds: - "1. On the facts and in the circumstances of the case and in lass, the learned Commissioner of Income-tax (Appeals) [CIT(A)J has erred in confirming the action of the learned Assessing Officer ('AO') of making additional disallowance of Rs. 99.27.500 under Section 14A of the Income tax Act. 1961 ('the Act') read with Rule 81) of the Income-tax Rules, 1962 ('the Rules'), without appreciating the fact that the Company has suo motto disallowed Rs. 68,56 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nagement Inc. The assessee claimed dividend income of Rs. 28,46,505/- from investments made in mutual funds and Rs. 3,88,420/- from investment in preferential shares of one of its group companies i.e. Morgan Stanley India Securities Pvt. Ltd. and claimed the same as exempt u/s 10(34) of the Act. The assessee made sue moto disallowance of Rs. 68,565/- u/s 14A of the Act read with rule 8D(2) of the Rules. The AO noted that the disallowance made by assessee suo moto amounting to Rs. 68,565/- is not acceptable and accordingly, he made disallowance under rule 8D(2)(iii) i.e. ½% of the average of the value of investment and he took the value of investment at Rs. 198,55,00,000/- and accordingly he computed disallowance of Rs. 99,96,065/-. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is that the assessee is engaged in the business activities of providing asset management services and the case law referred to by the CIT(A) of Damani Estate and Finance Pvt. Ltd. of ITAT Mumbai is not applicable because in that case the fact are that assessee was engaged in share trading business yielding both taxable income in the form of share trading profit and tax exempt income by way of dividend income and Tribunal applied the provisions of section 14A of the Act to stock in trade. The third proposition argued by the learned Counsel for the assessee is that, without prejudice to the other propositions, that assessee's dividend from investment in mutual funds is at Rs. 3,88,420/- and disallowance to this extent can be restricted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he orders of the lower authorities. 8. We find from the facts of the case that the assessee has earned dividend income of Rs. 28,46,505/- from investments made in mutual fund and Rs. 3,88,420/- from investment in preference shares of one of its group companies i.e. Morgan Stanley India Securities Private Limited, which was claimed as exempt under section 10(35) and 10(34) of the Act respectively. The assessee had suo-motto disallowed Rs. 68,565/- on a scientific basis, under Section 14A of the Act, being portion of the fully loaded cost of treasury personnel allocated to the Company, based on time spend by the treasury personnel for carrying out treasury activities viz. co-ordination of mutual fund investments, redemption of mutual fund, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the claim made by the assessee in respect of expenditure which is relatable to the earning of income which does not form part of the total income under the Act is found to be incorrect. On the very first proposition, argued by the learned Counsel for the assessee in the present case before us, we are of the view that the assessee has specifically raised ground regarding disallowance u/s 14A of the Act read with rule 8D(2) of the Rules and this is merely a proposition on which the assessee is arguing this issue. He need not to raise any specific ground qua this proposition as contested by the learned Sr. DR. We, accordingly, are of the view that in the present case the AO failed to adhere to the provisions of section 14A of the Act read ..... X X X X Extracts X X X X X X X X Extracts X X X X
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