The Income Tax Appellate Tribunal (ITAT), Delhi Bench directed the AO to include only investments yielding dividend income for computing disallowance.
The assessee company, M/s Religare Securities is a member of the Bombay Stock Exchange and National Stock Exchange and is engaged in the business of providing broking and depository services to retail clients.
The return of income was filed declaring an income of Rs. 2,72,15,81,980. Subsequently, the return of income was revised declaring income of Rs. 2,70,87,75,810. The case was selected for scrutiny and, thereafter, the assessment was completed at an income of Rs.2,73,16,74,200 after making additional disallowance of Rs. 1,93,79,583 under section 14A of the Income Tax Act, 1961 and another disallowance of Rs.35,18,803 being amount paid towards fines and penalties.
The assessee approached the First Appellate Authority who partly allowed the assessee’s appeal by deleting Rs. 1,93,79,589 being the additional disallowance made by the Assessing Officer under section 14A of the Act. The CIT(A), however, upheld the disallowance pertaining to the amount paid towards fines and penalties.
The Coram consisting of N.K. Billaiya and Sudhanshu Shrivastava restored the issue to the file of the Assessing Officer with a direction to include only those investments which have yielded dividend income for computing the average value of investments for the purpose of computing the amount of disallowance under section 14A of the Act.
The Tribunal directed the Assessing Officer to offer a reasonable opportunity to the assessee to present its case before proceeding to re-compute the disallowance.
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