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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA & SHRI PAVAN KUMAR GADALE
PER PAVAN KUMAR GADALE, JM:
The assessee has filed the appeal against the order of the Commissioner of Income Tax (Appeals) - 10, Mumbai, passed u/s. 143 (3) and 250 of the Income Tax Act, 1961. The assessee has raised the following grounds of appeal:-
Jabs Internat ional Pvt Ltd., Mumbai. - 2 -
1. The Ld. CIT(A) erred in confirming a sum of Rs. 3,17,722/- addition of Rs. 3,17,722/- being 0.5% of average investment u/s 14A r.w.r 8D may kindly be deleted and justice be done. (A) is erred in arriving at the conclusion that the alternative claim of the appellant that the disallowance u/s 14A are confirmed of the basis of ratio of case law would not apply where the share are held as investment may kindly be deleted and natural justice be done. 3. The Appellant requests to delete the addition u/s 14A confirmed by the Ld. CIT(A). 4. The appellant craves to add, alter or omit any or all the above grounds of appeal
before or at the of hearing of the appeal.
2. The brief facts of the case are that the assessee company is a manufacturer and exporter of spices, whole or ground, oil seeds & pulses & other agro products. The assessee has filed the return of income electronically on 30.09.2015 declaring a total income of RS.30,99,52,100/- and also filed the revised return of income on 18.05.2017. Subsequently, the case was selected for scrutiny under CASS and notice u/s 143(2) and 142(1) of the Act was issued. In compliance, the Ld. AR of the assessee appeared from time to time and details were filed. The A.O on perusal of the financial statements found that the assessee has earned dividend income of Rs. 60,700/- and show cause notice was issued for making disallowance under Sec.14A r.w.r. 8D of the IT Rules. The assessee filed the explanations on the sources of Jabs Internat ional Pvt Ltd., Mumbai. - 3 - investments on shares and no expenses are incurred for earning the dividend income. The assessee has made disallowance u/s 14A r.w.r 8A calculating at 0.5% on the average investments which worked out to Rs. 41,522/-.Whereas, the A.O. has observed that the disallowance made by the assessee company is not sufficient considering the various activities of the assessee. The A.O has calculated disallowance u/s 14A r.w.r 8D(iii) of the IT rules which work out to Rs. 3,17,722/- and assessed the total income of Rs. 31,02,69,822/-and passed the order u/s 143(3) of the Act dated 22.12.2017.
Aggrieved by the order, the assessee has filed an appeal with the CIT(A), whereas, the CIT(A) considered grounds of appeal, findings of the AO and submissions of the assessee. Finally the CIT(A) has confirmed the addition of the Assessing officer and dismissed the assessee appeal. Aggrieved with the CIT(A) order, the assessee has filed an appeal before the Hon’ble Tribunal.
4. At the time of hearing Ld. AR submitted that the CIT(A) has erred in confirming the addition of Jabs Internat ional Pvt Ltd., Mumbai. - 4 - Rs3,17,722/- u/s 14A r.w.r. 8D(iii) of the IT Rules. Whereas the assessee has received Rs. 60,700/- as dividend income and claimed exemption u/s 10(34) of the Act. Further, the assessee has not incurred any expenditure on such earning of dividend income. The Ld. AR supported his arguments relying on the judicial decisions and prayed for allowing the assessee appeal. Contra, the Ld.DR supported the orders of the CIT(A).
6. We heard the rival contentions and perused the material on record. The sole crux of the disputed issue is with respect to disallowance u/s 14A r.w.r. 8D(iii) of IT Rules. We find that the assessee has received the dividend income of Rs. 60,700/- which is not disputed and the contention of the assessee that the assessee has not incurred any expenditure on earnings of dividend income and therefore no disallowance is warranted. We find that the A.O has made disallowance of Rs. 3,17,722/- considering the 0.5% of the average investments under rule 8D(2)(iii). But the fact remains that the assessee has received dividend income of Rs. 60,700/- and the expenditure cannot be more than the dividend income.
Jabs Internat ional Pvt Ltd., Mumbai. - 5 - Considering the judicial decisions and the decision of the Cheminvest Vs. CIT (378 ITR 33)(Delhi) were it was observed that the disallowance cannot exceed the exempted income. We accordingly modify the order of the CIT(A) sustaining the addition to the extent of Rs. 60,700/-and partly allow the appeal of the assessee.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 31.03.2021.