TMI Blog2021 (1) TMI 1005X X X X Extracts X X X X X X X X Extracts X X X X ..... s attributable to earning of the exempt dividend income was not to be accepted. - Decided in favour of assessee. - ITA No. 4691/MUM/2019 - - - Dated:- 27-1-2021 - Shri C.N. Prasad (Judicial Member) And Shri N.K. Pradhan (Accountant Member) For the Assessee : Mr.Atul Deshpande, AR For the Revenue : Mr. Brajendra Kumar, DR ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2014-15. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-10, Mumbai [in short CIT(A) ] and arises out of the assessment completed u/s 143(3) the Income Tax Act 1961, (the Act ). 2. The grounds of appeal filed by the assessee read as under : 1. The DCIT 5(1)(1) has erred in making disallowance of ₹ 7,58,612/- u/s 14A of Income Tax Act, 1961 read with Rule 8D of Income Tax Rules 1962. Reasons given by the Assessing Officer while making above addition are insufficient and contrary to the facts and evidence on records. 2. Rule 8D can be applied only in case actual expenses are not available. In present case actual expenses incurred are available, hence the formula given in Rule 8D c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appellant that the investment of ₹ 75,00,000/- made in IDFC Super Saver Income Fund-Growth Plan does not earn tax free income as the proceeds earned on liquidation are subject to tax as long term capital gain, hence, on this investment, the disallowance u/s 14A of the Act read with Rule 8D of the Rules is uncalled for. Under these options no dividend is declared, the income attributable to the units under these options remain invested in funds. The growth funds generate income only in the form of capital gains/losses that accrue on sale/redemption of units of such funds. Therefore, the AO is directed rework the average value of investment for the purpose of computing the disallowances per Rule 8D(2)(iii) after excluding the investment in IDFC Super Saver Income Fund-Growth Plan. 5. Before us, the Ld. counsel for the assessee refers to the order of the Tribunal in assessee s own case for AY 2005-06 (ITA No. 5079/Mum/2012) and AY 2010-11 (ITA No. 5758/Mum/2015) and AY 2011-12 (ITA No. 5759/Mum/2015). Explaining that the disallowance of ₹ 7,71,048/- made by the AO u/s 14A r.w.r. 8D is incorrect, the Ld. counsel elaborates that the AO has made the disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts and circumstances of the case. Accordingly, we set aside the order of the ld. CIT (A) on this issue and direct the AO to restrict the disallowance to ₹ 25000/-, as referred above. 7.1 In assessee s own case for AY 2010-11, the Tribunal has held that: 6. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We find that the assessee had during the year under consideration earned a dividend income of ₹ 11,67,933/- on exempt income yielding investments of ₹ 7,12,52,078/-. The assessee had not attributed any part of the expenses as having been incurred for earning of the aforesaid exempt income. On a query by the A.O as to why the disallowance under Sec.14A may not be made in respect of the exempt dividend income, it was submitted by the assessee that as it had not incurred any expense other than demat charges, hence no disallowance under Sec.14A was called for in its hands. We find that the A.O had dislodged the claim of the assessee that no expense was attributable to earning of the exempt dividend income, merely on the basis of an observation that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of the assessee. It is only thereafter that the provisions of Section 14A(2) and (3) read with Rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable. We find that in the case before us, the claim of the assessee that no disallowance under Sec.14A was called for in its case had been dislodged by the A.O, not on the ground that having regard to the accounts of the assessee, as placed before him, it was not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee that no expenditure was incurred for earning of the exempt dividend income, but rather the same was not accepted for the reason that as per the A.O it was beyond comprehension that no expense debited by the assessee in the profit loss account could be related to earning of the exempt dividend income by the assessee. We have deliberated on the aforesaid observations of the A.O and are unable to persuade ourselves to subscribe to the same. We are of the considered view that as the A.O while dislodging the claim of the assessee, that no expense was attributable to earning of the exempt dividend income had failed to comply w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith regard to the correctness of the claim of the assessee that no expenditure was relatable to earning of the exempt dividend income. We are of the considered view that the A.O while dislodging the claim of the assessee that no expense was relatable to earning of the exempt dividend income ought to have made a mention of the expenses which were booked by the assessee in its books account, and in the backdrop of the same should have pointed out that the incurring of the same had an inextricable nexus with the earning of the exempt dividend income. We thus, are of considered view that as observed by us in the case of the assessee for the immediately preceding year, viz. A.Y 2010-11, in the year under consideration also the A.O while dislodging the claim of the assessee that no disallowance was called for in its hands under Sec. 14A, had failed to generate the requisite satisfaction with regard to the correctness of the said claim of the assessee. We thus, are of the considered view that as the disallowance made by the A.O Under Sec. 14A r.w Rue 8D is not as per the mandate of the judgment of the Hon ble Supreme Court in the case of Godrej Boyce Manufacturing Company Vs. DCIT and A ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
