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Income Tax Appellate Tribunal, KOLKATA BENCH “A-SMC” KOLKATA
Before: Shri Sanjay Garg
आदेश /O R D E R The present appeal has been preferred by the assessee against the order dated 15-10-2020 of the Commissioner of Income-tax (Appeals), Kolkata [hereinafter referred to as ‘CIT(A)’]. 2. The only issue raised in this appeal is relating to the confirmation of the disallowance made by Learned Assessing Officer [hereinafter referred to as ‘Ld. AO’] on account of expenditure relatable to tax exempt income earned by the assessee by invoking the provisions of section 14A of the Income-tax Act, 1961 [hereinafter referred to as the ‘Act’] read with section 8D of the Income-tax Rules 1962 [hereinafter referred to as the ‘Rules’]. 3. The assessee during the year under consideration earned tax exempt dividend income of Rs.9,76,000/-. The assessee made suo motu disallowance of Rs. 95,800/- on account of expenditure incurred relating to tax exempt dividend income earned by A.Y. 2012-13 Himadri Credit & Finance Ltd Page 2 the assessee. The Ld. AO, however, by invoking the provisions of section 14A of the Income-tax Act read with Rule 8D of the I.T Rules calculated the disallowance at Rs.18,52,755/-. In appeal, the Ld. CIT(A), however, restricted the said disallowance to Rs. 8,11,208/-. Being not satisfied with the above partial relief given by the Ld. CIT(A), the assessee has come in appeal before this Tribunal.
At the outset, Ld. Counsel for the assessee has submitted that as per provisions of section 14A of the Act, before applying Rule 8D of the I.T Rules, the AO was supposed to go through the calculations and the method adopted by the assessee in making the suo motu disallowance of Rs. 95,800/-. That the AO was required to record the satisfaction that the method adopted by the assessee was not correct, only then he could have invoked the provisions of section 14A of the Act read with Rule 8D of the I.T Rules to calculate the disallowance. It has been further pleaded by him that the Ld. AO while making the impugned disallowance also added the disallowance of interest expenditure incurred under Rule 8D(2)(ii) of the I.T Rules. That, in fact, the assessee did not incur any such interest expenditure for making any investments. That the assessee in fact has earned net positive interest income, therefore, it cannot be said that the assessee incurred any interest expenditure. It has been further submitted by the Ld. Counsel for the assessee that the investments in question were made by the assessee in the group company of the assessee. That taking into consideration the entire facts and circumstances in respect of investments made, the suo motu disallowance of Rs. 95,800/- by the assessee was, in fact, more than the expenditure incurred by the assessee in making the investments. It has been further submitted that the disallowance of expenditure under no circumstances, could exceed the total expenditure claimed by the assessee. Therefore, the reasonable disallowance of expenditure could have been made by the Ld. AO out of the tax exempt income earned by the assessee.
The Ld. DR, on the other hand, submitted that the Ld. CIT(A) has already given adequate relief to the assessee and has restricted the disallowance at Rs. 8,11,208/- as against the disallowance of Rs.18,52,755/- made by the Ld. AO.