SSE COMMODITIES PVT. LTD.,NEW DELHI vs. ITO WARD - 24(2), NEW DELHI

On ground no. 3 & 4 assessee challenged the disallowance of Rs. 1,03,162/- u/s 14A read with Rule 8D of the I.T. Act. Ld. Counsel for assessee submitted that AO did not make any addition u/s 14A of the Act. The Ld. CIT(A) enhanced the assessment by making disallowance u/s 14A and made the addition of Rs. 1,03,162/- u/s 14A of the Act. Ld. Counsel for assessee submitted that assessee has explained before the CIT(A) that assessee has earned dividend amounting to Rs. 25,015/- from Kotak Arbitage Fund which is not claimed as exempt in the computation of income and included in the total income. He has submitted that assessee has paid tax on the same dividend income also. He has referred to PB 25 which is details of income to show assessee has dividend received from Kotak Arbitage Fund amounting to Rs. 25,014.92 in assessment year under appeal. He has, therefore, restricted his arguments to the point that addition should be restricted to the amount of Rs. 25,015/- only and since tax is already paid on this amount by including the same in the computation of income, therefore, no further addition is to be made against the assessee.

On the other hand, Ld. DR relied upon the order of the Ld. CIT(A) and submitted that Ld. CIT(A) has correctly applied Rule 8D for making the above disallowance against the assessee.

I have considered the rival submissions and perused the orders of the authorities below. The CIT(A) disallowed Rs. 1,03,162/- u/s 251 of the IT Act. The assessee pleaded before Ld. CIT(A) that assessee earned dividend income of Rs. 25,015/- only which is not claimed as exempt in the computation of income and included in the total income of the assessee. These facts have not been disputed by the Ld. CIT(A) in his findings. The Hon’ble Delhi High Court in the case of CIT vs. Joint Investment Pvt. Ltd. 372 ITR 694 held that disallowance u/s 14A could not be exceeded more than the dividend income earned by the assessee. Since in the case of the assessee the record clearly revealed that assessee has earned dividend income of Rs. 25,015/- only, therefore, the addition shall have to be restricted to Rs. 25,015/- only as against Rs. 1,03,162/-. The assessee further claimed that tax has already been paid on amount of Rs. 25,015/-, therefore, no further addition shall have to be made. In view of the above, I set aside the orders of the authorities below and direct the AO to restrict the disallowance u/s 14A of the IT Act to the tune of Rs. 25,015/- only. AO is directed to verify, if assessee has paid tax on this amount by including the same in the total income of the assessee then no further disallowance shall be made against the assessee. The AO is directed to give opportunity of being heard to the assessee. In the result, the ground no. 3 & 4 of the appeal of assessee are allowed.

In the result, the appeal of assessee is partly allowed. Order pronounced in the open Court on 14.01.2021.