DCIT Vs SP Port Maintenance Private Limited (ITAT Mumbai)
Section 14A Disallowance Deleted as No Exempt Income Earned; Section 115JB Addition Also Deleted: ITAT Mumbai
The Income Tax Appellate Tribunal (ITAT), Mumbai, decided two departmental appeals arising from orders dated 27.09.2023 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi for Assessment Years (AYs) 2017-18 and 2018-19. As both appeals involved the same assessee, identical facts and common grounds, the Tribunal treated AY 2017-18 as the lead case and disposed of both appeals through a common order.
Material Facts and Procedural Background
The assessee, a private limited company engaged in port-related activities and management consultancy, filed returns declaring losses under the normal provisions and book losses under Section 115JB. During AY 2017-18, the assessee disclosed investments comprising non-current equity shares of ₹65 crore and current investments in mutual funds aggregating to ₹611.91 crore. As this was the first year of operations, only closing balances of investments existed. The Assessing Officer (AO) called upon the assessee to explain why disallowance under Section 14A read with Rule 8D should not be made.
The assessee submitted that it had not earned any exempt income during the relevant year. It stated that no dividend income or long-term capital gains had arisen from investments in unquoted equity shares or growth mutual funds, that the investments were made from its own funds raised through Optional Convertible Debentures subscribed by its holding company, that short-term capital gains had been offered to tax, and that no interest or similar expenditure had been incurred to earn exempt income.
