Poonawalla Shares & Securities Pvt. Ltd. Vs ACIT (ITAT Pune)
Summary: Poonawalla Shares & Securities Pvt. Ltd. challenged additions concerning disallowance under section 14A read with Rule 8D and denial of carry forward of long-term capital loss on listed shares for AY 2016-17. On the section 14A issue, the assessee had itself disallowed Rs.11,06,875/-, whereas the Assessing Officer applied the amended Rule 8D formula and made a further disallowance of Rs.10,83,615/-. The Tribunal first upheld the direct expenditure component of Rs.1,07,971/- since it was not challenged.
As regards proportionate interest expenditure of Rs.7,85,950/-, the Tribunal noted that the assessee possessed non-interest-bearing funds of Rs.39,35,44,380/- against investments of Rs.23,12,74,991/- and, following South Indian Bank Ltd. Vs. CIT, invoked the presumption that investments had been made from interest-free funds and deleted the interest disallowance. Regarding administrative expenditure of Rs.12,96,569/- computed at 1% of average investments, the Tribunal found that the Revenue could not establish retrospective operation of the amended computation formula.
It further observed that the lower authorities had considered the assessee’s entire investments rather than only investments yielding exempt income during the relevant previous year. Relying on ACIT Vs. Vireet Investment Pvt. Ltd. and ACB India Ltd. Vs. CIT, the Tribunal directed the Assessing Officer to recompute this component according to law. The assessee’s section 14A grounds were therefore partly accepted. The second substantive dispute concerned long-term capital loss of Rs.3,20,75,607/- arising on sale of listed shares of Orchid Chemicals & Pharmaceuticals Ltd. on which STT had been paid.
