DEPUTY COMMISSIONER OF INCOME TAX, VEJALPUR, AHMEDABAD vs. SYMPHOY LIMITED, BODAKDEV,AHMEDABAD

Apropos facts required for adjudication of the case are that during the year under consideration the assessee had average monthly balance of investments, yielding exempt income as per Rule 8D(ii) was to the tune of Rs.212,41,07,335/-. Out of these is investments, the assessee earned an amount of Rs.5,65,81,833/- and claimed the same as income exempt from taxation. The assessee has suo moto disallowed an amount of Rs.17,21,177/- on account of expenses incurred for earning the exempt income. Not satisfied with the expenses disallowed by the assessee the Assessing Officer resorted to invocation of provision of section 14A read with Rule 8D and determined disallowance of an amount of Rs.1,95,22,345/-. (212,41,07,335- 17,21,177).

Aggrieved, the assessee filed the appeal before the Ld.CIT(A), who deleted the disallowance made by the Assessing Officer on the grounds that the assessee had sufficient surplus funds and the disallowance made by the assessee suffice the expenditure incurred by the assessee for earning the exempt income.

Aggrieved, Revenue filed appeal before the Tribunal.

During the hearing the Ld.DR argued that the assessee could not satisfactorily explained the ratio of disallowance and also the Assessing Officer had right reasons for not satisfying himself with the disallowance made by the assessee. The Ld.DR argued that the invocation of section 14A(2) and the determination of disallowance @ 1% of the average monthly balance of the investments of the assessee is in accordance with the Rule 8D(ii) of Income Tax Rules. On the other hand, the Ld.AR argued that Asst.Year –2017-18 - 3– the Assessing Officer has no reason to invoke provisions of section 14(2) as the assessee has reasonably computed the disallowance on a scientific basis.

We have gone through the provision of the Act and the rationale of the disallowance determined by the assessee. We find that the assessee has considered the time utilized for purchase and sales transactions of the investments carried out employees and the relevant salary cost. We find that the assessee has allocated proportional the salary cost of the Executive Director, GM Finance, Assistant Manager and others senior Executive. Ergo, we find no reason for the revenue authorities to invoke the provisions of 14A(2).

In the result, the appeal of the Revenue is dismissed.