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2015 (7) TMI 1132 - ITAT KOLKATADisallowance in respect of the salary - Held that:- We noted that the Assessing Officer found that the assessee has debited towards salary a sum of ₹ 1,06,339/- in the Profit & Loss A/c. of its proprietary concern M/s. Janardan Hosiery Mills and in addition to this, the salary of ₹ 21,000/- was claimed in the computation of income under the head ‘profit & gains from business’ but the assessee has not adduced any evidence and explain how the salary has been claimed. Before us, the assessee contended that the salary has been incurred for the purpose of business. The CIT(Appeals) has simply rejected the submission of the assessee. We find from the order of CIT(Appeal's) that the CIT(Appeal s) without discussing the submissions made by the assessee just strictly confirmed the order of the Assessing Officer disallowing the salary. We, therefore, set aside the order of the CIT(Appeals) and delete the disallowance in respect of the salary. Disallowance towards the consultancy fees in respect of income-tax matters - Held that:- We have heard the rival submissions and carefully considered the same. The assessee is a proprietor of proprietorship concern M/s. Janardan Hosiery Mills and is also carrying on the business. Therefore, the assessee, in our opinion, is required consultancy from time to time in respect of its business. The expenses incurred by the assessee towards income-tax consultancy are for the purpose of business. We accordingly delete the disallowance made by the Assessing Officer. Thus this ground is allowed. Disallowance u/s 14A as well as Rule 8D - Held that:- We have heard the rival submissions and carefully considered the same. We noted that the Assessing Officer had disallowed the expenditure by invoking Rule 8D read with section 14A of the Income Tax Act. We noted that Rule 8D has been inserted by the Income Tax (5th Amendment) Rules, 2008 w.e.f. 24th March, 2008. Hon’ble Mumbai High Court in the case of Godrej & Boyce Mfg. Co. Ltd. –vs.- DCIT reported (2010 (8) TMI 77 - BOMBAY HIGH COURT ) has clearly held that Rule 8D is not retrospective but prospective. The impugned assessment is the assessment year 2007-08 while Rule 8D has been inserted w.e. f. 24t h March, 2008. Therefore, the Assessing Officer, in our opinion, is not correct in law in allowing the disallowance by applying Rule 8D. We further noted that in the case of Sanjiv Jajodia –vs. - DCIT [2010 (9) TMI 1026 - ITAT KOLKATA ] has taken the view that the disallowance under section 14A out of the expenses should be restricted only to 1% of the dividend income. Respectfully following the above decision we set aside the order of CIT(Appeal s) and direct the Assessing Officer to disallow 1% of the dividend income under section 14A of the Income Tax Act, 1961.
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