ICICI Securities Limited Vs DCIT (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai, decided an appeal filed by the assessee for Assessment Year 2011-12 against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC). Ground No. 1 was not pressed and was dismissed. The Tribunal adjudicated the remaining issues relating to disallowance under Sections 14A, 36(1)(vii), 40(a)(ia), and related provisions of the Income Tax Act.
On the disallowance under Section 14A read with Rule 8D, the assessee contended that it had earned exempt dividend income of only ₹92,178 and that the disallowance should be restricted to that amount. The Tribunal observed that it is a settled legal position that disallowance under Section 14A cannot exceed the exempt income earned. Accordingly, it directed the Assessing Officer (AO) to restrict the disallowance to the amount of exempt dividend income and delete the balance disallowance.
Regarding the disallowance of bad debts amounting to ₹8,67,059, the assessee submitted that the debt related to advisory and merchant banking services rendered to PNB Housing Finance Ltd., for which invoices had been raised and the income had already been offered to tax in Assessment Year 2010-11. The amount was subsequently written off as irrecoverable in the books of account. The Tribunal noted that the assessee had passed the necessary accounting entries and satisfied the conditions prescribed under Sections 36(1)(vii) and 36(2). Following the Supreme Court decision in TRF Ltd. and the CBDT Circular No. 12/2016, the Tribunal held that once the debt is written off in the books, it is not necessary to establish that it had become irrecoverable. It therefore directed deletion of the disallowance.
