MAYUR SRICHAND GALANI,PUNE vs. INCOME-TAX OFFICER, WARD - 6(3), PUNE

आयकर अपीलीय अिधकरण, पुणे �यायपीठ “एक-सद�य मामला” पुणे म� IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “SMC”, PUNE BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI PARTHA SARATHI CHAUDHURY, JM आयकर अपील सं. / ITA No.213/PUN/2018 िनधा�रण वष� / Assessment Year : 2013-14 Mayur Srichand Galani, E-wing, Ground Floor, K.K. Market, Near Shankar, Maharaj Math, Dhankawadi Satara Road, Pune. .......अपीलाथ� / Appellant PAN : AJRPG6379E बनाम / V/s. ITO, Ward- 6(3), ……��यथ� / Respondent Pune. Assessee by : Shri V. L. Jain Revenue by : Shri N. Ashok Babu सुनवाई क� तारीख / Date of Hearing : 07.02.2019 घोषणा क� तारीख / Date of Pronouncement : 21.02.2019 आदेश / ORDER PER D. KARUNAKARA RAO, AM: This appeal is filed by the assessee against the order of CIT(A)-4, Pune dated 17.10.2017 for the Assessment Year 2013-14. 2. Before us, ld. Counsel for the assessee filed a modified ground of appeal and the same reads as under :- “The learned CIT(A) has erred in law and on facts in confirming the disallowance of Rs.1,94,003/- under section 14A of the Income Tax Act, 1961.” 3. Originally, in the said ground of appeal, the assessee referred the disallowance of Rs.1,18,420/- only. The ld. Counsel for the assessee informed that the said figure stands revised upwards to the figure of Rs.1,94,003/- by virtue of the modification order u/s 154 of the Act passed by the Assessing

2 ITA No.213/PUN/2018 Officer making disallowance by invoking provisions of clause (iii) of Rule 8D(2) of the I.T. Rules, 1962. As it stands, the Assessing Officer disallowed a sum of Rs.1,94,003/- under clause (ii) of Rule 8D(2) of the Rules and a sum of Rs.29,972/- under clause (iii) of Rule 8D(2) of the Rules. 4. Referring to the said disallowance of Rs.1,94,003/- made under clause (ii) of Rule 8D(2) of the Rules, ld. Counsel for the assessee submitted that the said disallowance is uncalled for in view of the existence of sufficient interest- free own funds of the assessee. Bringing our attention to the contents of the Balance Sheet and its Annexures, ld. Counsel demonstrated that the assessee has capital account of Rs.2.54 crores and the investments made out of the same was only to the tune of Rs.1.59 crores in M/s. Galani Fashions and M/s. Galaxy Life Style. It is not the case of the Assessing Officer that the interest bearing funds were diverted to the capital account of the said concerns where investments are made. The interest expenditure is into the business activities not into the exempt income linked with the investments. 5. On hearing both the sides and on finding the existence of adequate own funds, we find the disallowance made by the Assessing Officer on account of clause (ii) of Rule 8D(2) of the Rules amounting to Rs.1,94,003/- is required to be deleted. We order accordingly. Referring to the disallowance made under clause (iii) of Rule 8D(2) of the 6. Rules amounting to Rs.29,972/-, ld. Counsel brought our attention to the Profit and Loss Account and submitted that the total expenditure debited to the Profit and Loss Account is only on account of Profession tax paid and Professional fees disallowance. In this regard, against disallowance, ld.

3 ITA No.213/PUN/2018 Counsel relied on various Coordinate Benches of the Tribunal’s decisions to demonstrate that the disallowance should not be made. 7. On considering the assessee’s submissions as well as the submissions of the ld. DR, we are of the opinion, the said disallowance was done mechanically without getting into the nexus of claims in the Profit and Loss Account on the debit sides, when the actual debit relatable to the expenditure for earning the exempt income is only Rs.29,972/- and the disallowance of Rs.75,583/- is prima-facie unsustainable. Therefore, entire expenditure debited to Profit and Loss Account is only Rs.29,972/-. Therefore, an ad-hoc disallowance of Rs.10,000/- should meet the ends of justice. Accordingly, this part of ground of the assessee is partly allowed. 8. In the result, the appeal of the assessee is partly allowed. Order pronounced on 21st February, 2019. Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (D. KARUNAKARA RAO) �याियक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER पुणे / Pune; �दनांक / Dated : 21st February, 2019 Sujeet आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. 3. The CIT(A)-4, Pune; 4. The Pr. CCIT, Pune; िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “एक-सद�य मामला” 5. / DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.