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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
AadoSa / O R D E R भहावीय स िंह, उऩाध्मक्ष के द्वाया / PER MAHAVIR SINGH, VP:
This appeal filed the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-8, Mumbai [in short CIT(A)], in Appeal No. CIT(A)-8/IT-38/2017-18 vide order dated 10.07.2019. The Assessment was framed by the Dy. Commissioner of Income Tax, Circle 3(3)(1), Mumbai (in short ‘DCIT/ AO’) for the A.Y. 2015-16 vide order dated 13.06.2017 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
ITAs No. 5760/Mum/2019 Rupa Equities Pvt. Ltd.; AY 15-16
The only issue in this appeal of assessee is against the order of CIT(A) confirming the action of the Assessing Officer in making disallowance of expenses relatable to exempt income by invoking the provisions of section 14A read with Rule 8D of the Income tax Rules, 1962 (hereinafter referred to as 'Rules’). For this, assessee has raised the following effective grounds: - “I. DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D OF RS.6,35,031/-.
1.1 On the facts and in the circumstances of the case and in law, the Ld. [Commissioner of Income Tax (Appeals) [CIT(A)] erred in confirming disallowance made by the Learned Assessing Officer under Section 14A of the read with Rule 8D of the Income-tax Rules, 1962 at Rs. 26,35,031/-.
1.2 It is submitted that no part of interest expenditure is to be disallowed as it has direct nexus with interest income. It is submitted that the disallowance under Section 14A of the Act computed by the Learned Assessing Officer and confirmed by the CJT(A) is excessive, unreasonable and unwarranted.
1.3 It is submitted that the Learned CIT(A) and learned Assessing Officer erred in disallowing legitimate business / establishment expenditure and proportionate interest as expenditure directly relating to Dividend Income.”
ITAs No. 5760/Mum/2019 Rupa Equities Pvt. Ltd.; AY 15-16
We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that the assessee has earned exempt income in the form of dividend on mutual fund at ₹1,88,15,081/- under section 10(34) of the Act. The Assessing Officer made disallowance by invoking the provisions of section 14A of the Act read with Rule 8D of the Rules and thereby, disallowed interest expenses under Rule 8D(2)(ii) of the Rules at ₹20,47,215/- and administrative expenses being 0.5% of average value of investment under Rule 8D(2)(iii) of the Rules at ₹ 5,95,854/-. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) confirmed the action of the Assessing Officer.
Aggrieved, assessee came in appeal before Tribunal.
We noted from the details filed by the assessee and the audited accounts of the assessee that the assessee has sufficient own funds in the form of share capital and reserves and surplus amounting to ₹16,02,67,705/- as on 31.03.2015 as against the investment of ₹15,96,06,706/- in the shares of mutual funds. The assessee has filed complete details as under:-