Case Law Details
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
Present appeals of the assessee are arising from different orders of ld. CIT(A) both dated 21.10.2024 having DIN & Order No. ITBA/APL/S/250/2024-25/1069805974(1) for AY 2018-19 & DIN & Order No.ITBA/APL/S/250/2024-25/1069830029(1) for AY 2019- 20.
2. Brief facts of the case leading to the filing of present appeals are that the assessee is a Limited Liability Partnership (“LLP”) engaged in the business of investment advisory It has filed its return of income on 17.10.2018 declaring an income of Rs.27,68,74,140/-. The return of income filed by the assessee was processed u/s 143(1) of the Income Tax Act, 1961 (in short “the Act”).
Thereafter, the CPC issued a notice to the assessee proposing an adjustment of Rs.51,83,084/- for AY 2018-19 and an amount of Rs.52,61,099/- for AY 2019-20. In response to the notice of CPC, the assessee filed a response. However, the ld. CPC disallowed the claim of the assessee. It is relevant to mention here that in AY 2018- 19, an amount of Rs.51,83,004/- has been received by the assessee as dividend from mutual funds and the same were claimed by the assessee as exempt u/s 10(35) of the Act. For the assessment year 2019-20, the facts are same, there is difference in figure of disallowance. Therefore, we are deciding these two appeals by way of this consolidated order.
3. Aggrieved with the order of CPC, assessee filed an appeal before the CIT(A) and contended various aspects of the matter. However, the ld. CIT(A) could not find any force in the submissions of the assessee and observed that the assessee failed to file any documentary evidences vis-à-vis the dividend income earned from mutual fund and not from companies. The ld. CIT(A) has dismissed the appeal of the assessee. Now the assessee has come up in appeal.
4. At the outset, Counsel for the assessee pointed out that ld. JCIT(A) has erred in observing that the assessee has failed to file any documentary evidence before the lower authorities. Counsel for the assessee drawn the attention of the bench before the voluminous papers filed with the NFC and CPC, Bangalore.
5. The D.R. relied upon the orders of the authorities below. However, the ld. D.R. submitted that the matter may be restored to the file of JAO to decide the matter afresh.
6. We have heard the rival submissions and perused the materials available on After considering the facts and circumstances of the case, we are of the view that the lower authorities have not at all considered the papers filed before with them. Therefore, we restore the matter to the file of JAO with a direction that if the assessee is able to establish that the dividend income is earned from mutual funds, which are exempt from taxation, then the claim of the assessee deserves to be allowed. With this direction, we restore this matter to the jurisdictional AO.
7. In the result, both the appeals of the assessee are allowed for statistical
Order pronounced in the open court on 3rd Feb, 2024
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