ECL Finance Limited vs. DCIT Central Circle

Parties Involved

Facts Summary

The assessee, ECL Finance Limited, is a registered Non-Banking Financial Corporation engaged in financing and corporate lending against securities. During the assessment year 2019-20, the assessee received dividend income of Rs.190,33,83,114/-. The Assessing Officer (AO) noticed that the assessee had made a suo moto disallowance of Rs.66,86,289/- under section 14A of the Income Tax Act, 1961. The AO computed the disallowance at Rs.33,72,48,918/- and proposed it in a draft assessment order. The assessee filed an appeal against the AO's order before the Commissioner of Income Tax (Appeals), who restricted the disallowance to Rs.1 Cr.@1% of the annual average of monthly average of investments. Both the assessee and the Revenue filed separate appeals before the Income Tax Appellate Tribunal (ITAT), Mumbai.…

Legal Issues

• 1. Whether the Assessing Officer was correct in computing the disallowance under section 14A of the Income Tax Act, 1961, without recording satisfaction about the incorrectness of the voluntarily offered disallowance by the assessee.

Judgment Outcome

Decided in favour of Assessee.

Precedents Relied Upon

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