IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘B’: NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.1567/Del/2023 (ASSESSMENT YEAR 2017-18)

Asst. CIT, Comoro Technologies P.

Circle-6(1), Ltd., Vs. New Delhi.

2, LSC Uday Park, New Delhi-110049 PAN-AABCC4458N (Appellant) (Respondent)

Assessee by Sh. Parvesh Sharma, Adv. and Sh. Sushil Kumar, Adv.

Department by Sh. Rajesh Kumar Dhanesta, Sr.

DR Date of Hearing 24/02/2025 Date of Pronouncement 19/03/2025

O R D E R

PER MANISH AGARWAL, AM:

This appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) Delhi, having DIN No. ITBA/NFAC/S/250/2022- 23/1051238625(1), dated 24.03.2023 in appeal NO. CIT(A), Delhi- 2/10197/2019-20 for Assessment Year 2017-18, passed under section 250 of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’).

2. Brief facts of the case are that the assessee is a private limited company and filed its return of income for impugned year on 22.01.2018 declaring income of Rs.1,63,56,850/-. The case was selected for limited scrutiny under CASS where the one of the reasons was that the exempt income is significant lower than as compared to investment made to earn exempt income. The assessment was completed u/s 143(3) vide order dt. 29.09.2019 at a total income of Rs. 2,01,54,906/- by making disallowance u/s 14A at Rs. 37,98,056/-. Aggrieved by the assessment order, assessee preferred appeal before the ld. CIT(A) which stood dismissed in terms of the impugned order dt. 24.03.2023 passed by NFAC.

3. Against the said order of the NFAC, the assessee is in appeal before the Tribunal.

4. The assessee challenged the appellate order on the strength of following grounds of appeal:-

“1. That on the facts and in circumstances of the case the order of the CIT (A)

is bad in law.

2. That on the facts in circumstances of the case the Ld. CIT (A) erred in law in sustaining the addition of Rs. 37,98,056/- made by the Assessing Officer u/s 14A of the Act r. w. rule 8D of the Income-tax Rules 1962, by ignoring the facts that no expenditure was incurred by the appellant to earning exempt income.

3. That the Ld. CIT(A) has not establish or demonstrated any nexus of expenditure direct or indirect to the dividend earned during the year.

4. That the learned Commissioner of Income Tax (Appeals) has erred in sustaining the addition u/s. 14A to the extent of 1% of the average value of the investment made by the AO without recording the satisfaction.

5. That the action of the CIT (A)/AO is contrary to the law laid down by the various High Courts including jurisdictional High Court.

6. That the appellant craves leave to add, delete or amend any of the grounds of appeal on or before the disposal of the present appeal.”

5. Since all the grounds of appeal are in relation to the disallowance made u/s 14A of the Act of Rs. 37, 98,056/thus the same are taken together for consideration.

6. In the present case, the AO observed that assessee has declared exempt income of Rs.43,49,026/- and LTCG of Rs.10,230/- and made investments in mutual funds. He further observed that closing value of investment is of Rs.36,43,81,719 which is up from Rs.35,62,39,020/- from las year. Accordingly, he invoked the provisions of section 14A and by applying Rule 8D has made the addition of Rs.37,98,056/- being 1% of the average value of investments.

7. Before us, Ld. AR submitted that the AO has made addition u/s.14A r.w. Rule 8D by ignoring the fact that appellant has not claimed any interest on funds borrowed nor other expenses was claimed as the fund manager has not charged any fee or remuneration. Therefore, Section 14A of the Act is not applicable and hence no disallowance under Rule 8D can be made. To support his contentions, ld. AR relied on the decision of Hon’ble Supreme court in the case of Maxopp Investment Ltd. Vs. CIT reported in 402 ITR

640(SC) wherein it is held by the Hon’ble Apex court