Trident Group Limited Vs DCIT (ITAT Chandigarh)
₹1.02 Cr Disallowance u/s 14A Upheld: Large Investment Portfolio Cannot Be Managed at ‘Zero Cost’, Holds ITAT Chandigarh
The Chandigarh Bench “B” of the ITAT dismissed the appeal of M/s Trident Group Limited for AY 2017-18 and upheld disallowance of ₹1,02,44,219 u/s 14A r/w Rule 8D. The assessee had earned substantial exempt dividend income of ₹22.42 crore from an investment portfolio exceeding ₹124 crore and claimed that no expenditure, except ₹5,774 towards demat charges, was incurred to earn such income, asserting that investments were made entirely out of interest-free own funds.
The Tribunal noted that the assessee’s principal activity itself was management of investments and royalty income, with employee costs of about ₹2.66 crore and other administrative overheads clearly relatable to investment management. In the absence of separate books for exempt income activities, the AO was justified in recording dissatisfaction with the assessee’s claim and invoking Rule 8D. The plea that Rule 8D was applied mechanically was rejected, as managing such a large investment portfolio necessarily involves substantial administrative effort.
The ITAT held that the AO correctly applied Rule 8D and restricted the disallowance to 1% of the annual average of monthly average investments, well within the cap of exempt income earned. Distinguishing earlier decisions relied upon by the assessee, the Tribunal confirmed that the disallowance was justified on facts and in law, and dismissed the appeal in full
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
