MESSUNG SYSTEMS PRIVATE LIMITED,,PUNE vs. DEPUTY COMMISSIONER OF INCOME TAX,, PUNE

आदेश / ORDER PER ANIL CHATURVEDI, AM :

This appeal filed by the assessee is emanating out of the order of 1. Commissioner of Income Tax (A) – 7, Pune dated 31.01.2017 for the assessment year 2011-12.

Assessee is a company stated to be engaged in the business of trading of Programmable Logic Controllers (PLC) and its parts. Assessee filed its return of income for A.Y. 2011-12 on 30.09.2011 declaring total

income of Rs.15,11,04,121/-. The case was selected for scrutiny and

thereafter assessment was framed u/s 143(3) of the Act vide order

dt.20.03.2014 and the total income was determined at

Rs.15,14,70,020/-. Aggrieved by the order of AO, assessee carried the

matter before Ld.CIT(A), who vide order dt.31.01.2017 (in appeal

No.PN/CIT(A)-7/Cir-9/1099/2014-15) granted partial relief to the

assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in appeal

before us and has raised the following effective ground :

“The Hon’ble CIT(A) erred in confirming the disallowance of Rs.3,55,902/- made by the AO as relatable to exempt dividend income of Rs.20,92,021/- under Sec.14A r.w. Rule 8D(2)(iii) of the I.T. Rules. The appellant pleads that the disallowance made by the AO is not justified and is not valid.

assessee had received dividend income of Rs.20,92,021/- which was

claimed as exempt income and suomoto disallowed Rs.10,000/- u/s

14A of the Act. The assessee was asked to explain as to why part of

administrative expenses should not be considered to have been incurred

for earning exempt income and be disallowed u/s 14A of the Act. The

assessee made the submissions which were not found acceptable to the

AO. AO thereafter by following the methodology prescribed under Rule

8D of I.T. Rules worked out the disallowance at Rs.3,65,902/- u/s 14A

of the Act and made its addition. Aggrieved by the order of AO, assessee

carried the matter before Ld.CIT(A), who upheld the order of AO but

however directed the AO to grant relief of Rs.10,000/- that was suomoto

disallowed by the assessee. Aggrieved by the order of Ld.CIT(A),

assessee is now before us.

Ld.CIT(A) and submitted that the dividend received from mutual funds

has been either credited to the mutual fund account or Bank account

via ECS and no administrative costs has been incurred. He submitted

that there were only 61 entries of dividend and in such a situation, the

administrative expenses that were estimated at Rs.800/- per month

i.e., 10,000/- per year was fully justified. He further submitted that AO

has not recorded proper satisfaction and has not come to a conclusion

as to how the working of disallowance made by the assessee was

incorrect. He therefore submitted that no addition be called for in the

present case. Ld. D.R. on the other hand submitted that AO had

recorded a proper satisfaction before invoking the provisions of Sec.14A

of the Act and once it is held that the provisions of Sec.14A of the Act

are applicable, then the disallowance has to be worked as per the

mandate of Rule 8D of I.T. Rules. He thus supported the order of AO.

record. The issue in the present ground is with respect to disallowance

u/s 14A of the Act. It is assessee’s contention that no proper

satisfaction was recorded by the AO before invoking the provisions of

Sec.14A of the Act. We do not find any merit in the argument of the

Ld.A.R. We find that assessee had suomoto disallowed Rs.10,000/- as

expenses u/s 14A of the Act. During the course of assessment

proceedings AO had asked the assessee to justify the working of

disallowance. He thereafter and after considering the submissions of

the assessee concluded that the working made by the assessee was not

proper. He thereafter proceeded to disallow the expenses as per the

mandate of Rule 8D. Considering the aforesaid facts, we are of the view

that no error could be found in the action of the AO. We thus confirm the action of the AO. Thus, the ground of the assessee is dismissed.

Order pronounced on 19th day of August, 2019.

Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 19th August, 2019. Yamini

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A)-7, Pune. 4. Pr. CIT-6, Pune. 5 �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” / DR, ITAT, “B” Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार/ BY ORDER

// True Copy // व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.