PRABHA MOHTA,KOLKATA vs. I.T.O.,WARD-35(1), KOLKATA

The assessee in the present case is an individual who filed her return of income for the year under consideration on 27.09.2013 declaring a total income of Rs. 6,88,260/-. In the said return, the dividend income of Rs. 20,28,140/- received during the year under consideration was claimed to be exempt by the assessee. No disallowance on account of expenses incurred in relation to the said exempt income however was offered by the assessee as required by the provision of section 14A. The AO, therefore, applied Rule 8D and worked out the expenses incurred by the assessee in relation to the exempt income at Rs. 6,74,200/- and since the total expenses claimed by the assessee as per the profit and loss account were Rs. 6,07,313/- Assessment Year: 2013-14 Prabha Mohta only, he made a disallowance of Rs. 6,07,313/- u/s 14A of the Act. On appeal, the CIT(A) sustained the said disallowance made by the AO u/s 14A. Aggrieved by the order of the Ld. CIT(A), the assessee has preferred this appeal before the Tribunal.

I have heard the arguments of both the sides on this issue and also perused the relevant material available on record. As regards the disallowance made u/s 14A on account of interest as worked out as per Rule 8D(2)(ii), the learned counsel for the assessee has submitted that the entire investment in shares was made by the assessee out of her own funds and it is observed that this position was accepted by the AO as well as by the Ld. CIT(A) as mentioned specifically on page 6 of the impugned order of the Ld. CIT(A). The disallowance made on account of interest u/s 14A as worked out by applying Rule 8D(2)(ii) thus is not sustainable and I direct the AO to delete the same. As regards the disallowance on account of other expenses u/s 14A r.w.r. 8D(2)(iii), the learned counsel for the assessee has contended that the same is required to be worked out by taking into consideration only the value of investment in shares which actually fetched the exempt dividend income to the assessee and not the value of entire investment as done by the AO. Since this contention of the learned counsel for the assessee is duly supported by the decision of Hon’ble Kolkata High Court in the case of REI Agro Ltd. GA No. 3022 of 2013 (ITAT No. 161 of 2013) judgement dated 23.12.2013, we direct the AO to re-compute the disallowance to be made by applying Rule 8D(2)(iii) taking into consideration only the value of investment in shares which actually fetched exempt dividend income to the assessee during the year under consideration.

Assessment Year: 2013-14 Prabha Mohta 4. Before parting, it is noted that the order is being pronounced after ninety (90) days of hearing. However, taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. For coming to such a conclusion, I rely upon the decision of the Co- ordinate Bench of the Mumbai Tribunal in the case of DCIT vs. JSW Limited in & 6103/Mum/2018, Assessment Year 2013-14, order dt. 14th May, 2020.

In the result, the appeal of the assessee is partly allowed. Order Pronounced in the Open Court on 22nd May, 2020.