BHAVIN UPADHYAY,VADODARA vs. DCIT, CIRCLE-3(1), VADODARA

The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-3, Vadodara, dated 12/04/2018 (in short “Ld. CIT(A)”) arising in the matter of assessment order dated 22/11/2016 passed under s.143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2014-2015.

The only issue raised by the assessee is that the ''Ld.CIT (A)'' erred in confirming the disallowance made by the AO in part amounting to Rs.1,73,132/- under the provision of section 14A r.w Rule 8D of the Income-tax Rules.

Briefly stated facts are that the assessee in the present case is an individual and Doctor by profession. The assessee in the year under consideration has shown exempted income amounting to Rs. 5,20,424/- only but he did not make any disallowance of any expenses incurred against such exempted income in pursuance to the provision of section 14A r.w. Rule 8D of the Rules. Accordingly, the AO invoked the provisions of section 14A r.w. rule 8D and made the disallowance of Rs.5,08,824/- as detailed under: Sr.No. Particular Amount 1. Direct expenses Nil 2. Interest expenses Rs. 4,14,526/- 3. Administrative expenses Rs. 94,298/- Total Rs. 508824/- 3.1 The AO accordingly disallowed the above expenses and added to the total income of the assessee.

Aggrieved assessee preferred an appeal before the ''Ld.CIT (A)'' who partly confirmed the order of the AO by observing as under: 3.3.2 The A.R. of the appellant has filed written submission along with working of disallowance of expenses u/s 14A and comparative chart assets and liabilities. It is further pleaded that the assessee has own funds of Rs.9,35,09,739/- at the end of 31.03.2014 as against investment was of Rs.2,32,35;826/- as on 31.03.2014. Thus, the assessee has made investment out of his own fund which is reflected in the Balance Sheet. Reliance is placed in the case of (i) CIT Vs Suzlon Energy Ltd.[2013] 354 ITGR 0630(Guj); (ii) Pr.CIT Vs India Gelatine & Chemicals Ltd. [2015] 376 ITR 0353 (Guj), (iii) CIT Vs GSFC Ltd. [2013] 217 taxmann 0343(Guj) and (iv) CIT Vs Torrent Power Ltd.[2014] 363 ITR 0474 (Guj). 3.3.3 The A,0 has taken average of fixed assets of Rs.1,74,59,134/- instead of Rs.9,18,03,217/- as per Balance Sheet, As per prescribed method of working under Rule 8D, the correct figure works out to Rs.1,72,132/-. According to the A.R., the appellant gets relief of Rs.3,36,692/- and balance of Rs.1,72,132/- is to be confirmed. The AO is directed to work-out as per the method prescribed under Rule 8D before allowing the relief. The appellant is also directed to submit all necessary supporting documentary evidence before the A.O subject to the verification, the appeal is allowed for statistical purpose.

Being aggrieved by the order of ''Ld.CIT (A)'' the assessee is in appeal before us.

The Ld. AR before us submitted that the own fund of the assessee exceeds the amount of investment therefore there cannot be any disallowance on account of interest expenses.

On the other hand Ld. DR vehemently supported the order of the authorities below.

We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussions we note that the fund of the assessee exceeds the amount of investments which can be verified from details as given below:

In the result, the appeal of the assessee is partly allowed.