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Income Tax Appellate Tribunal, “B(SMC
Before: Shri A. T. Varkey, JM & Shri Girish Agrawal, AM]
ORDER
Per Shri A.T.Varkey, JM:
This is an appeal preferred by the assessee against the order of Ld. CIT(A)-21, Kolkata dated 31.01.2022 for Assessment year 2011-12.
2. The only grievance of the assessee is against the action of Ld. CIT(A) in dismissing the ground raised by the assessee against the disallowance made by the AO u/s 14A read with Rule 8D2(iii) of the Income Tax Rules, 1962 (hereinafter referred to as the Rules).
The brief facts regarding this issue only is that the assessee has received dividend income of Rs. 2,89,272/- from M/s MSP Steel & Power Ltd. The AO noted that since the assessee had own funds for making the entire investments, he did not make any disallowance applying Rule 8D2(ii) of the Rules. However he made disallowance made Rule 8D2(iii) to the tune of Rs. 7,28,165/- (0.5% of Rs. 14,56,32,922/-).
Aggrieved the assessee preferred an appeal before the Ld. CIT(A) which was dismissed by the Ld. CIT(A). However interestingly he confirmed the disallowance supposed to have been made by the AO under Rule 8D2(ii) of the Rules (however it is the fact the AO has not made any disallowance under Rule 8D2(ii) of the Rules).
M/s Shree Vinay Finvest Pvt. Ltd. A.Y. 2011-12 5. Be that as it may be, according to the assessee, since it has received only dividend from M/s MSP Steel & Power Ltd. the application of Rule 8D2(iii) i.e. 0.5% of investment ought to be carried out one in respect of the said scrip only should be made as per the ratio of order of the Hon’ble High Court of Calcutta order dated 23.12.2013 in of 2013 in the case of REI Agro Ltd. vs. DCIT. We note that the Hon’ble Calcutta High Court in the aforesaid case has upheld the action of this Tribunal in the case of REI Agro Ltd. vs. DCIT (144 ITD 141)(Kol) held that for making disallowance u/s 14A read with Rule 8D, while applying Rule 8D2(iii) the investment only which has given rise to the exempted income should be taken into consideration. As per the aforesaid ratio of the judgment, in the instant case the following facts are noted:
Sl. No. Shares/MF Bal. as on 31.03.2011 Bal. as on 31.03.2010 1 MSP Steel & Power Ltd. 18,87,179/- 2,35,21,965/- Thus, for the purpose of disallowance u/s 14A read with Rule 8D2(iii) 0.5% of the investment in MSP Steel & Power Ltd. is only to the tune of Rs. 1,27,04,752/-. Therefore 0.5% of it is Rs. 63,523/-. Therefore, the disallowance is restricted to Rs. 63,523/- and the balance added by the AO (Rs. 7,28,165/- - Rs. 63,523/-) to the tune of Rs. 6,64,642/- is directed to be deleted.
In the result, the appeal of the assessee is partly allowed.
Order is pronounced in the open court on 7th April, 2022
Sd/- Sd/- (Girish Agrawal) (A. T. Varkey) Accountant Member Judicial Member
Dated: 07.04.2022 SB, Sr. PS
M/s Shree Vinay Finvest Pvt. Ltd. A.Y. 2011-12 Copy of the order forwarded to: 1. Appellant- M/s Shree Vinay Finvest Pvt. Ltd., 5th Floor, Room No. 501, 13A, Dacres Lane, West Bengal-700069.
Respondent – DCIT, Central Circle-1(2), Kolkata 3. The CIT(A)- 21, Kolkata (sent through e-mail) 4. Pr. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail)