The Income Tax Appellate Tribunal (ITAT), Chennai Bench while directing the re-computation ruled that the Investments yielding exempted income ought to be considered while computing disallowance under Rule 8D(2)(iii) of the Income Tax Act.
The assessee company, M/s. Unifi Capital Pvt. Ltd. is engaged in the business of stock broking, portfolio management, corporate advisory services, custodial services and dealing in shares, securities, derivatives, etc., filed its return of income for the assessment year 2013-14 admitting total income of Rs.2,31,79,286/-.
The assessment for impugned assessment year was completed u/s.143(3) of the Income Tax Act, 1961 on 24.02.2016 and determined total income at Rs.2,47,88,104/- after making addition towards disallowance under section 14A of the Act at Rs.8,58,818/- and addition towards disallowance of membership fee paid to MCX Exchange Limited at Rs.7,50,000/-.
The assessee carried the matter in appeal before the ld.CIT(A) but could not succeed. The CIT(A) for the reasons stated in his appellate order confirmed additions made by the AO towards disallowance of expenses u/s.14A of the Act and has also confirmed findings of the AO in disallowance of membership fees paid to MCX Exchange Ltd.
The issue raised was in respect of disallowance of expenses in relation to exempt income under section 14A of the Act.
The coram of V. Durga Rao and G. Manjunatha ruled that for computing disallowance under Rule 8D(2)(iii), those investments which yield exempt income only need to be considered. The assessee has submitted details, as per which, out of total investments of Rs.5,06,26,240/- a sum of Rs.1,20,000/- was only yielding exempt income.
Therefore, the ITAT set aside the issue to the file of the AO and directed him to re-compute disallowance in light of submissions made by the assessee that only a sum of Rs.1,20,000/- is yielding exempt income.
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