Light Ray Advisors LLP Vs DCIT (ITAT Bangalore)
Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has allowed two appeals filed by Light Ray Advisors LLP against separate orders, both dated October 21, 2024, passed by the learned Commissioner of Income-Tax (Appeals) [CIT(A)] for Assessment Years (AY) 2018-19 and 2019-20. The appeals challenge the disallowance of dividend income claimed as exempt under Section 10(35) of the Income Tax Act, 1961.
The assessee, a Limited Liability Partnership (LLP) engaged in investment advisory services, had declared an income of Rs. 27,68,74,140/- in its return filed for AY 2018-19. The return was processed under Section 143(1) of the Act. Subsequently, the Centralized Processing Centre (CPC) issued notices proposing adjustments of Rs. 51,83,084/- for AY 2018-19 and Rs. 52,61,099/- for AY 2019-20. These adjustments pertained to dividend income received from mutual funds, which the assessee had claimed as exempt under Section 10(35) of the Act. Despite filing a response to the CPC’s notice, the claim was disallowed. The facts for AY 2019-20 were similar, with a different amount of disallowance.
Aggrieved by the CPC’s action, the assessee filed appeals before the CIT(A), arguing the merits of the exemption claim. However, the CIT(A) dismissed the appeals, observing that the assessee had failed to file any documentary evidence to substantiate that the dividend income was indeed earned from mutual funds and not from companies. The assessee then approached the ITAT.
At the outset of the hearing before the ITAT, the Counsel for the assessee pointed out that the learned CIT(A) had erred in stating that no documentary evidence was filed before the lower authorities. The Counsel drew the Bench’s attention to the voluminous documents that were purportedly filed with the National Faceless Assessment Centre (NFAC) and the CPC in Bangalore.
The Departmental Representative (DR) relied on the orders of the authorities below. However, the DR also submitted that the matter could be restored to the file of the Jurisdictional Assessing Officer (JAO) for a fresh decision.
After considering the rival submissions and perusing the available materials, the ITAT noted that the lower authorities appeared not to have considered the documents filed by the assessee. Therefore, the Tribunal deemed it appropriate to restore the matter to the file of the JAO. The ITAT directed the JAO to re-examine the issue and allow the assessee’s claim for exemption under Section 10(35) if the assessee is able to establish that the dividend income was indeed earned from mutual funds, which are exempt from taxation. With this direction, the ITAT allowed both appeals of the assessee for statistical purposes, meaning the matter is sent back to the AO for a fresh assessment on this specific point.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
