LIFELONG REAL ESTATE PRIVATE LIMITED,DELHI V. DCIT, CIRCLE 13(1), DELHI

ITA 2251/DEL/2025

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Lifelong Real Estate Private Limited appealed against the order of the Ld. Addl/JCIT(Al)-12, Mumbai, which confirmed the disallowance of Rs. 13,97,502 made by the Assessing Officer (AO) under section 14A of the Income Tax Act. This disallowance was related to expenses incurred in earning tax-free dividend income, which were added back to the book profits for MAT calculation under section 115JB. The Tribunal examined whether the assessee had sufficient interest-free funds to cover the investments yielding tax-free income and whether the disallowance under section 14A should affect the MAT computation. The Tribunal concluded that the disallowance should not apply to the MAT computation, leading to the deletion of the addition.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 836512 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 04-04-2025
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR ARORA
• Assessee Lawyers: DINESH GUPTA
• Keywords: Reasonable cause; Capital Gains; Earning of tax free income; Rule 8D
• Section: 154; 14A; 115JB

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A”, NEW DELHI BEFORE SHRI SUDHIR KUMAR, JUDICIAL MEMBER AND MRS. RENU JAUHRI, ACCOUNTANT MEMBER ITA NO. 2251/Del/2025 A.YR. : 2017-18 LIFELONG REAL ESTATE PRIVATE LIMITED, 508, SAKET DISTRICT CENTRE, DLF SOUTH COURT, DELHI – 110 017 (PAN: AABCL4530E) VS. DCIT, CIRCLE 13(1), C.R. BUILDING, NEW DELHI (APPELLANT) (RESPONDENT) Appellant by : Shri Dinesh Gupta, CA Respondent by : Shri Ajay Kumar Arora, Sr. DR. Date of hearing : 29.01.2026 Date of pronouncement : 11.02.2026 ORDER Per Sudhir Kumar, JM : The Assessee has filed the instant Appeal against the Order of the Ld. Addl/JCIT(Al)-12, Mumbai dated 6.11.2023, relating to assessment year 2017- 18. 2. The appeal filed by the assessee is time barred by 429 days. For this, assessee has filed the condonation petition. After perusing the condonation petition, we are of the view that reasonable cause has been attributed to the assessee in filing the belated appeal, hence, the delay in dispute is condoned, appeal is admitted for adjudication. Printed from counselvise.com 2 | P a g e 3. Brief facts of the case are that the assessee is engaged in the business of real estate activities. Assessee filed return of income declaring its total income at Rs. 2,13,27,837/- and at book profit of Rs. 3,09,69,622/- as per the provisions of Section 115JB of the Income Tax Act. Assessment was completed at a total income of Rs. 2,27,25,339/- thereby making an addition of Rs. 13,97,502/- under section 14A in normal income as well as increased the book profits for the calculation of MAT. In appeal, Ld. CIT(A) dismissed the appeal of the assessee. Aggrieved with the action of the Ld. CIT(A), assessee is in appeal before us on the following grounds of appeal:- 1. That on the facts and in the circumstances of the assessee company’s case the Addl/JCIT (A) erred on facts and in law in confirming the disallowance of Rs. 13,97,502/- made by the AO under section 14A and also making consequential adjustment while computing book profit under section 115JB of the Act. 2. That on the facts and in the circumstances of the assessee company’s case the Ld. Addl/JCIT (A) erred in law in not disposing off the ground of appeal by way of speaking order relating to increase made by the AO to the amount of book profits for the purposes of section 115JB by adding thereto the amount of disallowance under section 14A. 4. Ld.AR has submitted that the assessee company has earned the tax free dividend income from investments in mutual funds and for making these investments, assessee had enough free interest free owned funds. Also all expenses debited in profit and loss statement and profession. He further submitted that AO has not brought any material on record to show that assessee has incurred any expenditure for earning the tax free dividend income. He further submitted that assessee company has paid tax under the provisions of Printed from counselvise.com 3 | P a g e section 115JB of the Act as the tax payable under MAT is more than tax payable under normal provisions of the Act and while calculating he book profits u/s. 115JB the assessee has correctly reduced the amount of tax free dividend income of Rs. 13,97,502/- as per the provisions of section 115JB. In view of above, it is submitted that the AO erred in disallowance under section 14A and also making consequential adjustment while computing book profits under section 115JB of the Act, hence, the same may be deleted. 5. On the other hand, Ld. DR relied upon the orders of the authorities below. 6. We have heard the rival contentions and perused the records. We note that the assessee company is engaged in real estate business and assessee declared income from business, capital gains and other sources. The AO made the addition of Rs. 13,97,502/- under section 14A read with Rule 8D i.e. to the extent of exempt income being dividend from mutual funds. It is noted that while computing its income from business the assessee company disallowed entire administrative expenses of Rs. 10,04,980/-. It claimed interest expenses of Rs. 13,45,855/- against interest income from FDRs of Rs. 13,53,729, thus its income under the head ‘other sources was Rs. 7875/-. Assessee has outstanding unsecured loans/ other current liabilities as at 31.3.2017 or Rs. 24,34,95,625/-. The assessee company did not claim deduction of any administrative expenses at all for earning dividend income of Rs. 13,97,502/- as the entire administrative expenses were disallowed while calculating income under head ‘income from business’. The assessee company had interest free funds available with it as on 31.3.2017 amounting to Rs. 31,46,58,704/- which includes investment in mutual funds of Rs. 26,99,98,329/- and Rs. 4,46,60,375/- towards surplus interest free funds. It is further noted that total investments of the assessee company as on 31.3.2017 was Rs.3,32,04,218/- towards non-current investments in shares of private limited company; Rs. 26,99,98.329/- towards current investments in mutual funds (other than FDs with Bank). In view of the aforesaid factual matrix, it is abundantly clear that assessee had enough interest Printed from counselvise.com 4 | P a g e free funds available with it and such funds were more than the investments which yielded dividend during the financial year. As regards addition to total income u/s. 115JB of the Act, the AO did not make addition in terms of section 115JB of the Act in the assessment order, however, while computing income tax in the computation sheet attached with the return of income AO assumed deemed total income in terms of section 115JB of the Act at Rs. 3,23,67,124/- as against u/s. 115JB declared by the assessee at Rs. 3,09,69,622/-. There is no subsequent order u/s. 154 of the Act. We find that it is settled law that disallowance u/s. 14A of the Act shall not apply to Minimum Tax Computation. Hence the addition in dispute is not sustainable, thus, the same is hereby deleted and accordingly, the grounds raised by the assessee are allowed. 9. In the result, the Assessee’s appeal is allowed. Order pronounced in the open court on 11.2.2026 Sd/- Sd/- (RENU JAUHRI) (SUDHIR KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER SR Bhatanaggar Date:- 11.02.2026 Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(Appeals) ` 5.DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Printed from counselvise.com "