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TMI Blog2018 (9) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... mputation of disallowance u/s 14A read with Rule 8D of the rules, we find from the balance sheet of the assessee that the assessee has got sufficient own funds of ₹ 12.93 crores whereas investments made by the assessee was only ₹ 7.54 crores. Hence it can be safely presumed that the investments were made only out of the own funds of the assessee - As relying on Reliance Utilities & Power Ltd [2009 (1) TMI 4 - BOMBAY HIGH COURT] no disallowance under the second limb of section 8D(2)(ii) towards interest is required to be made in the instant case. With regard to the disallowance made under Rule 8D(2)(iii) of the rules amounting to ₹ 3,26,941/-, we find that the Co-ordinate Bench of this tribunal in the case of REI Agro Ltd. reported in [2013 (9) TMI 156 - ITAT KOLKATA] had held that only those investments which had resulted dividend income should be considered for the purpose of computing disallowance thereon. Accordingly, we direct the Ld. A.O. to recompute the disallowance to be made under Rule 8D(2)(iii) Addition on account of Portfolio Management Services (PMS) fees paid as not eligible for deduction while computing the capital gains of the assessee - Held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard to the accounts of the assessee and apparently proceeded to determine the disallowance under section 14A of the Act by applying 2nd 3rd limb of Rule 8D(2) of the Rules as under:- Under 8D(2)(ii) ₹ 7,82,830/- Under 8D(2)(iii) ₹ 3,26,941/- Total ₹ 11,09,771/- Less disallowance made by the assessee ₹ 32,830/- Total disallowance u/s 14A to be made ₹ 10,76,941/- 4. The Ld. CIT(A) observed that there is no dispute with regard to disallowance made by the A.O. under Rule 8D(2)(iii) amounting to ₹ 3,26,941/- before him. The only dispute was with regard to the second limb of Rule 8D(2) of the rules. The assessee pointed out before Ld. CIT(A) that the learned A.O. had taken wrong figure of average value of assets at ₹ 4,99,29,027/-. It was pointed out that this figure has been arrived by considering only the value of current assets after netting off the current liabilities. The assessee submitted that the avera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evident from the assessment order itself. Hence the plea of the learned AR that the assessee had paid tax on Long Term Capital Gain under section 115JB does not come to the rescue of the assessee. It is a fact that long term capital gain has been claimed as exempt by the assessee and accepted by the Ld. CIT(A) under normal provisions of the Act, against which action of the Ld. CIT(A), the revenue had not preferred any appeal before us. (b) Only the dividend income had suffered dividend distribution tax u/s 115O and that too in the hands of dividend distributing company and not in the hands of the assessee herein. The assessee company having received dividend of ₹ 12,43,558/- had not suffered any tax thereon and had claimed the same as exempt in its return of income which is in accordance with the provisions of the Act. Hence the preliminary question reframed herein above that the provisions of Section 14A of the Act per se are not applicable to the assessee is decided against the assessee. 7. With regard to the computation of disallowance u/s 14A of the Act read with Rule 8D of the rules, we find from the balance sheet of the assessee that the assessee has got suffi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as income from business because the services of portfolio managers were availed by the assessee. He observed that the money was given by the assessee to portfolio management services provider with the motive to earn profit. The Ld. A.O. also placed reliance on various decisions in support of his contentions. 11. It was pointed out before the Ld. CIT(A) that none of the cases cited by the Ld. A.O. ever held that transactions through Portfolio Management Services would necessarily be in the nature of business transactions. The assessee placed reliance on the co-ordinate bench decision of Pune Tribunal in the case of KRA Holding Trading Pvt. Ltd. vs DCIT among others. The Ld. CIT(A) held that this decision of Pune Tribunal has been distinguished in several decisions rendered by Bombay Tribunal and accordingly decided this issue against the assessee. Aggrieved the assessee is in appeal before us. 12. We have heard rival submissions. At the outset, we find that the Ld. CIT(A) had accepted that the gains on sale of shares through PMS providers to be taxed under the head capital gains. Against these findings of the Ld. CIT(A), the revenue has not preferred the appeal before us ..... X X X X Extracts X X X X X X X X Extracts X X X X
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