KIRLOSKAR PROPRIETARY LTD,PUNE vs. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 14, PUNE

आदेश / ORDER PER LALIET KUMAR, JM :

1. Disallowance of Expenses u/s.14A. The learned CIT(A) erred on facts and in law in confirming the disallowance of expenses of Rs.3,64,806/- u/s.14A on the ground that the assessee has not shown any expense towards earning of exempt income. He failed to appreciate the fact that the company had invested in the Mutual Funds and any cost incurred by the Mutual Fund agency was recovered by them directly at the time of investment or redemption as the case may be by increasing or reducing the NAV which was directly adjusted against the purchase or sale price of Mutual Fund units by the company and the same is not debited to books of account. He further failed to appreciate the fact that in the assessee’s own case in AY 2010- 11, the Hon’ble ITAT Bench “B Pune had restricted the disallowance to Rs.75,000/-.

2. The assessee craves leave to add, alter, delete or substitute all or any of the above grounds of appeal.”

“9. Disallowances u/s.14A : The Assessing Officer has made disallowances of Rs.5,63,520/- u/s. 14A r.w. Rule 8D on account of administrative expenses incurred on investments. The contention of the assessee is that the assessee has made investment in Mutual Funds alone. To substantiate his contentions the assessee has placed on record account statements of various Mutual Funds at pages 3 to 30 of the paper book. Admittedly, the assessee has not made any disallowances in respect of interest free income earned on investment made. The contention of ld. AR is that in all Mutual Funds where the assessee has made investment, dividend is reinvested in the Scheme. It has been further contended that Mutual Fund agencies recover the expenditure for managing portfolio at the time of investment or redemption as the case may be and accordingly adjust NAV of units purchased. The fact that the assessee has invested in Mutual Funds where the dividend income is reinvested in the scheme has not been disputed by the Department. After considering the totality of the facts we are of the view that the assessee must have been incurring some administrative cost in managing the Mutual Funds. Therefore, to meet the ends of justice we disallow Rs.75,000/- u/s. 14A of the Act as expenditure towards earning of interest free income. Accordingly, ground No. 1 raised in the appeal by the assessee is partly accepted.”

2.1 The Ld. AR of the assessee further submitted that there is no change in facts except the assessment years i.e. A.Ys.2012-13 & 2013-14. During the assessment years under consideration, in A.Y. 2012-13, the assessee has earned dividend income of Rs.45,83,084/- against which the Assessing Officer had made disallowance of Rs.3,64,806/-. Similarly for the assessment year 2013-14, the assessee has earned exempt income of Rs.34,42,223/- against which the Assessing Officer has made disallowance of Rs.2,02,385/- by invoking Rule 8D(2)(iii).

3. The Ld. DR relied upon the orders of the Assessing Officer as well as the Ld. CIT(Appeals) and submitted that provisions of Rule 8D(2)(iii) are required to be applied in the cases of the assessee.

4. We have heard the rival contentions and perused the materials available on record. We find the Co-ordinate Bench of the Tribunal, Pune in assessee’s own case (supra.) has restricted the disallowance and respectfully following the same reasoning, for the assessment year 2012-13, disallowance is restricted to Rs.1,50,000/- and for the assessment year 2013-14, disallowance is restricted to Rs.1,25,000/-. We order accordingly.

In the result, both the appeals of the assessee are partly allowed. 5.

Order pronounced on 11th day of February, 2020.

Sd/- Sd/- D. KARUNAKARA RAO LALIET KUMAR ACCOUNTANT MEMBER JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 11th February, 2020. SB आदेश की प्रनिलऱपप अग्रेपषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2.