IN THE INCOME-TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER &

SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA 125/MUM/2025 (A.Y. 2014-15)

ITA 126/MUM/2025 (A.Y. 2015-16)

Chimanlal Maneklal v/s. Income Tax Officer Securities Private Limited, बनाम Circle – 4(1)(1), Aayakar Rajabahadur Building 45, M.P. Bhavan, Mumbai-

Shetty Marg, Fort, Mumbai 400020, Maharashtra

400 023, Maharashtra स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAACC1892P Appellant/अपीलार्थी .. Respondent/प्रतिवादी

Appellant by : Shri K. Gopal & Ms Neha Paranjpe,ARs Respondent by : Shri Mahesh Pamnani (Sr. DR)

Date of Hearing 24.02.2025 Date of Pronouncement 03.03.2025 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :-

The above two captioned appeals are filed by the assessee against the orders passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to assessment order u/s 143(3) of the Income- tax Act, 1961 [hereinafter referred to as “Act”] dated 06.12.2016 as passed by the Dy. Commissioner of Income Tax, Circle-4(1)(1), Mumbai for the Assessment Years [A.Y.] 2014-15 & 2015-16. Since the grounds of appeal and facts of the case are identical and also the appeals having been heard together, both these appeals are being adjudicated in this composite order for the sake of brevity. We take up ITA No.125/Mum/2025 as the ‘Lead case’ below:

2. The grounds of both appeals are as under:-

ITA 125/MUM/2025(AY 2014-15)

1. The learned Commissioner of Income-tax (Appeals) has erred in confirming the action of the assessing officer in disallowing an amount of Rs.27,57,464/- under rule 8D read with section 14A of the Income-tax Act 1961 as against of Rs 34,378/- disallowed by your appellant. Your appellant submits that looking to the facts and circumstances of the case and in law, no additional expenses were incurred to earn the exempt dividend income. Your appellants submit that the additional disallowance made by the AO & confirmed by Hon'ble CITA is unwarranted and the same ought to be deleted.

Without prejudice to the above, your appellant submits that the learned Assessing officer has considered bank charges of Rs.6,89,640/- as interest expenditure while calculating disallowance under Rule 8D(ii) of Income-tax Rules, 1962. Your appellants submit that bank charges are not interest expenditure and therefore should be excluded from interest expenditure while calculating disallowance under Rule 8D(ii) of the Income-tax Rules, 1962 and the disallowance should be reduced accordingly.

3. Facts in brief are that the assessee is a company and a member of Bombay Stock Exchange (BSE) capital market segment, National Stock Exchange (NSE) capital market segment and National Stock Exchange (NSE) Future & Options Segment with business comprising of share broking, trading, jobbing, arbitrage etc. The learned AO has made disallowance of interest expense u/s 14A applying the formula as prescribed under Rule 8D(ii). It is seen that the assessee earned dividend income amounting to Rs.75,57,993/- during the year and has claimed the same as exempt during the year. Further, it allocated an amount of Rs.34,378/- on account of expenditure incurred towards earning of the tax exempt dividend income as required by section 14A of the Act.The AO made disallowance of Rs 27,57,464/- u/s

14A of the Act.

4. The ld.CIT(A) has considered the issue at length in upholding the action of the AO. Before him, it was contented that the assessee had sufficient reserve and surplus and share capital in comparison to the investment made in dividend yielding instruments. However, it was noted by the ld. AO as well as by the ld.CIT(A) that the assessee did not consider the interest expenses incurred by the assessee for calculating disallowance u/s 14A of the Act, although it had shown huge interest expense in comparison to its interest income and also the assessee had not brought on record any cogent documentary evid