Motilal Oswal Financial Services Limited Vs DCIT (ITAT Mumbai)
Assessee,Motilal Oswal Financial Services Ltd. (successor of Mope Investment Advisors Pvt. Ltd.),filed return for AY 2016-17 declaring income of ₹10.27 crore. AO completed scrutiny assessment u/s 143(3) on 28.12.2019, making: Disallowance u/s 14A: ₹33.92 lakh.& Disallowance u/s 80G: ₹20.60 lakh.
On appeal, CIT(A) partly confirmed the disallowance u/s 14A.
Assessee’s Grounds
- Rule of consistency violated – In earlier years (including AY 2012-13), suo motu disallowance was accepted.
- No valid satisfaction by AO for rejecting suo motu disallowance of ₹64,529.
- 14A disallowance cannot exceed exempt income (here, dividend income was only ₹3.33 lakh).
- Relied on group company precedents and ITAT orders where suo motu disallowance was accepted. Argued AO gave no cogent reasons to invoke Rule 8D.
Revenue defended Rule 8D(2)(iii) computation at ₹15.50 lakh (0.5% of average investments) & claimed that assessee’s allocation of ₹64,529 (5% of employee time) was notional and unsustainable. Revenue pointed to AO’s satisfaction in assessment order.
Tribunal’s Findings
- On AO’s satisfaction: AO had recorded satisfaction in assessment order noting interest-bearing funds used for investments. Hence, contention rejected – ground dismissed.
- On quantum of disallowance :
AO’s disallowance exceeded exempt income (₹33.92 lakh vs. dividend ₹3.33 lakh).
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