SHREYAS R. MEHTA,MUMBAI vs. ACIT- 10(3)(1), MUMBAI

We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the assessee has claimed dividend income at Rs. 66,90,255/- and claimed the same as exempt. According to AO, the assessee has not attributed any expenses relatable to this exempt income and hence, he required the assessee to explain the same. The AO applied the Rule 8D(2)(iii) and made disallowance of administrative expenses relatable to exempt income at Rs. 2,31,279/-. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) also confirmed the action of the AO. Aggrieved, now assessee is now in appeal before Tribunal.

Before us, the learned Counsel for the assessee drew our attention to its paper book wherein the assessee has debited the expenses relatable to this earning of the dividend income i.e. bank charges of Rs. 600, custody fee of Rs. 8,273/-, the demat charges of Rs. 39,934/-, the STT charges of Rs. 15,860/-, which are debited in the capital account of the assessee and not claimed in the profit and loss account. According to the learned Counsel these expenses are relatable to earning exempt income and the assessee has not made any claim of these expenses with regard to business expenses. It was claimed by assessee before AO and before us demonstrated by filing the separate accounts maintained for investment purposes as well as for the purpose of business of the assessee. The learned Counsel for the assesse in view of the above stated that the Tribunal in assessee’s own case in for AY 2010-11 i.e. the immediately preceding year 3 Shreyas R Mehta; AY:2011-12 exactly on same facts and reasoning also deleted the addition vide Para 5 as under: - “5. We have heard the rival submissions. It is found that the assessee had not claimed any expenditure against the exempt income. Therefore, in our opinion, the FAA was not justified in confirming the disallowance made by the AO. We find that in the case of Joint Investments Pvt. Ltd.(372ITR694),the Hon’ble Delhi High Court has held that the window for disallowance was indicated in section 14A and was only to the extent of disallowing expenditure “incurred by the assessee in relation to the tax exempt income. Respectfully, following the above decision, we reverse the order of the FAA, as the window was not open for disallowance in the case under appeal-the assessee had not claimed any expenditure to earn the exempt income. Effective ground of appeal, raised by the assessee, is decided in his favour.”

In the result, the appeal assessee is allowed.