DSP ADIKO HOLDINGS PVT. LTD.,MUMBAI vs. DCIT-CIRCLE- 2(1), MUMBAI

Since all these appeals involve common issue arising out of identical set of facts and circumstances, therefore, as a matter of convenience, these appeals were heard together and are being disposed of by way of this consolidated order. However, for the sake of brevity, we are discussing the facts as they appear in the appeal relating to one of the assessee, namely, DSP Adico Holdings Pvt. Ltd.

The only common dispute in all these appeals relates to disallowance under section 14A r/w rule 8D.

Brief facts are, during the assessment proceedings, the Assessing Officer noticed that during the year the assessee has earned exempt income by way of dividend on mutual fund and shares amounting to ` 12,52,50,710. Whereas, it has disallowed ` 2,02,688, under section 14A of the Act. Therefore, he called upon the assessee to show cause why disallowance expenditure for earning exempt income should not be made by applying the provision of rule 8D(2). While objecting to disallowance proposed by the Assessing Officer the assessee submitted, it has already disallowed the direct expenses relating to exempt income as well as proportionate disallowance of the balance expenditure as a proportion of the exempt income to the total income. Further, the assessee submitted, under identical facts and circumstances, the Tribunal while deciding the issue in earlier

The learned Commissioner (Appeals), after considering the submissions of the assessee, granted partial relief to the assessee by restricting the disallowance to ` 5,34,326.

Shri Madhur Agarwal, learned Counsel for the assessee submitted, the total expenditure debited to the Profit & Loss account for the year under consideration is ` 6,71,000. Out of which, the assessee apportioned an amount of ` 2,02,688, towards expenditure incurred for earning exempt income and disallowed voluntarily under section 14A of the Act. He submitted, during the year under consideration the assessee had taxable income of more than ` 18 crore, whereas, expenditure debited to the Profit & Loss account is only ` 6.71 lakh. Therefore, in proportion to taxable and exempt income, the assessee had made disallowance under section 14A of the 5 DSP Adiko Holdings Pvt. Ltd. DSP HMK Holdings Pvt. Ltd. Act. He submitted, following the same method of apportioning expenditure on proportionate basis between the taxable and exempt income, the assessee had been making disallowance under section 14A in the past assessment years. He submitted, while deciding the appeals for the assessment year 2008–09, 2010–11 and 2011–12, the Tribunal has accepted the method followed by the assessee and restricted the disallowance to the amount voluntarily disallowed. He submitted, even the aforesaid decisions of the Tribunal has been approved by the Hon'ble Jurisdictional High Court while dismissing the appeals preferred by the Department. In support of such contention, he furnished before us the decisions of the Tribunal and the Hon'ble Jurisdictional High Court. Thus, he submitted, the disallowance under section 14A r/w rule 8D should be restricted to the quantum of disallowance made by the assessee voluntarily.

The learned Departmental Representative relied upon the observations of the Assessing Officer.

We have considered rival submissions and perused the material on record. Though there is no dispute that during the year under consideration, the assessee had earned both taxable as well as exempt income, however, fact remains, the total expenditure claimed by the assessee in respect of all sources income earned during the year is ` 6.71 lakh. Even out of the said amount, the assessee has further

Facts being identical, our aforesaid decision would apply mutatis mutandis to the appeals relating to the other two assessee’s which are under consideration in the present order.