IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SMT. BEENA PILLAI (JUDICIAL MEMBER)

Assessment Year: 2017-18 Apcotex Industries Limited Vs. Assistant Commissioner of MIDC Taloja Income Tax, Circle - 15(1)(1)

Raigarh (MH)

Maharashtra - 410208 [PAN: AAACA3427G]

(Appellant) (Respondent)

Assessee by Shri Piyush S. Chhajed, A/R Revenue by Shri Limbasiya Kavan Nareshkumar, Sr. DR.

Date of Hearing 04.02.2026 Date of Pronouncement 13.03.2026 ORDER Per Smt. Beena Pillai, JM:

The present appeal filed by assessee arises out of the order dated 24/07/2025 passed by the NFAC, Delhi [hereinafter “the Ld.CIT(A)] for A.Y. 2017-18 on the following grounds of appeal:- “1. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeal) erred in upholding the disallowance of Rs. 15,59,529/- u/s 14A without appreciating that appellant had not incurred any direct or indirect expenses, nor any satisfaction to that effect was recorded by assessing office and, the appellant had already suo moto disallowed direct expenses in return of income.

2. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeal) erred in upholding disallowance of depreciation of Rs. 6,92,248/- on the office premises without appreciating that the office premises was part of the block of assets and used for business and therefore depreciation ought to have been allowed.

3. The Appellant craves the leave to add, amend, alter and/or delete any of the above grounds of appeal at/or before the time of hearing.”

2. Facts in brief are as under:-

The assessee filed its return of income declaring total income at Nil on 01/11/2017. Subsequently, the case was selected for scrutiny and notices u/s 143(2) and 142(1) were issued to the assessee. In response to the statutory notices, the representative of the assessee appeared before the Ld.AO and filed the requisite details as called for. The Ld.AO noticed that the assessee is engaged in the business of manufacturing of synthetic rubber and lattices.

2.1. The Ld.AO, after considering the submissions of the assessee, made additions/disallowances under the following heads:-

1. Disallowance of employees’ contribution towards provident fund – Rs. 8,83,195/-.

2. Disallowance in respect of deduction u/s 35(2AB) of the Act –

Rs. 3,73,243/-.

3. Disallowance of expenses incurred for earning exempt income u/s 14A – Rs. 15,59,529/-.

4. Disallowance of interest on MSMED payments – Rs. 1,69,000/- 5. Disallowance of depreciation on assets (house properties) – Rs.

6,92,248/-.

Aggrieved by the additions made by the Ld. AO, the assessee preferred an appeal before the Ld.CIT(A).

3. The Ld.CIT(A), after considering the submissions of the assessee, upheld the disallowance made u/s 14A amounting to Rs. 15,59,529/- and the disallowance of depreciation on assets amounting to Rs.

6,92,248/-.

Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before this Tribunal.

4. Ground No. 1 raised by the assessee is in respect of the disallowance made u/s 14A of the Act.

The Ld.AR submitted that the assessee had invested in equity- oriented mutual funds and equity instruments which yielded exempt income. While computing the disallowance under section 14A, the ₹

assessee had suo motu disallowed a sum of 63,03,077/- being the portfolio management service (PMS) fees paid, along with STT of ₹

2,79,446/-. It was submitted that, apart from the aforesaid amounts, the assessee had not incurred any direct or indirect expenditure for earning the exempt income.

4.1. The Ld.AR further submitted that, apart from the portfolio management service (PMS) fees paid by the assessee, no other expenditure had actually been incurred for maintaining the investments. It was contended that the said cost effectively covers both direct as well as indirect expenditure, which would otherwise be debited to the Profit & Loss Account under various heads such as personnel cost, administrative expenses, and interest cost in respect of the funds inv