KAWALJIT SINGH CHOUDHARY,MUMBAI vs. ACIT CIRCLE-25(2), MUMBAI

The solitary issue raised in the appeal by the assessee is against disallowance of Rs.4,17,577/- u/s. 14A of the Income Tax Act, 1961 [in short ‘the Act’].

Ms. Neelam C. Jadhav appearing on behalf of the assessee submits that the assessee has earned dividend income of Rs.1,09,353/-. The Assessing Officer invoked Rule 8D and recomputed the disallowance u/s. 14A of the Act to Rs.4,17,577/-. The assessee is engaged in trading of shares. The dividend earned by the assessee is in respect of shares held as stock-in-trade. The Assessing Officer while making disallowance u/s. 14A of the Act has erred in taking interest earned by the assessee as interest expenditure for investment purpose. The assessee has not incurred any expenditure for earning exempt income. The ld. Authorized Representative for the assessee prayed for deleting the disallowance made u/s. 14A of the Act.

Per contra, Shri Manoj Mishra representing the Department vehemently defended the impugned order and prayed for dismissing appeal of the assessee.

Both sides heard, orders of authorities below examined. It is an undisputed fact that the assessee has earned dividend income of Rs.1,09,353/- during the period relevant to the assessment year under appeal. No suo-motu disallowance was made by the assessee for earning exempt income. Taking into consideration entire facts, we accept the alternate prayer of the assessee and restrict the disallowance u/s. 14A of the Act to the extent of exempt income earned during the relevant period. The appeal by assessee is partly allowed, in the terms aforesaid.

In the result, appeal by assessee is partly allowed.