ASST CIT 16(2), MUMBAI vs. JANAK DILIP DWARKADAS, MUMBAI

We have heard the parties and perused the record. The assessee herein is an advocate and he filed his return of income for the year under consideration declaring a total income of Rs. 32.54 crores. The assessee had held a property identified as “Pune farmhouse property” for self occupation and declared annual letting value of the same at Rs. 15,000/-, by treating the said property as deemed to be let out. The Assessing Officer, however, determined the annual letting value of property at 8% of the cost of the property and the same resulted in an addition of Rs. 4,21,694/-. The Learned CIT(A) followed the decision rendered by Hon'ble Bombay High Court in the case of M.V.

The Assessing Officer also noticed that the assessee has earned exempt income, but did not make any disallowance u/s. 14A of the Act. The Assessing Officer took the view that disallowance should be made in accordance with Rule 8D of the I.T. Rules and accordingly computed disallowance at Rs. 70.31 lakhs u/r. 8D(2)(iii) of the I.T. Rules. The Learned CIT(A) noticed that the assessee did not claim any expenditure relating to investment activities in his Profit and loss account. He also noticed that the assessee has debited all expenditure relating to share investment activity to his capital account. The Learned CIT(A) further noticed that an identical issue was considered by him in A.Y. 2012-13 and he has deleted an identical addition by him by following the decision rendered by the Tribunal in the case of ACIT Vs. Iqbal M. Chagla (ITA No. 377/Mum/2013). Accordingly he deleted the disallowance made by the Assessing Officer u/s. 14A of the Act.

Aggrieved by the order passed by learned CIT(A) on the above said issues, the Revenue has filed this appeal before us.

At the time of hearing, learned AR submitted that an identical additions were made by the Assessing Officer in A.Y. 2012-13 also and they were deleted by learned CIT(A) in that year also. The Revenue challenged the decision of learned CIT(A) by filing the appeal before the Tribunal and the Coordinate Bench, vide its order dated 11.5.2018 passed in has dismissed the appeal of the Revenue. He submitted that the facts are identical in this year also and accordingly prayed that the order passed by the Tribunal in A.Y. 2012-13 may be followed in this year also.

The Learned DR, on the contrary, supported the order passed by the Assessing Officer.

With regard to the first issue relating to determination of annual letting value of Pune Farm House property, we noticed that learned CIT(A) has followed the binding decision rendered by Hon'ble Bombay High Court in the case of M.V. Sonawala (supra) and further we noticed that the view taken by Ld CIT(A) on an identical issue in A.Y. 2012-13 has since been upheld by the Coordinate Bench in (referred supra) with following observations :-

The next issue relates to disallowance made u/s. 14A of the I.T. Act. We noticed that the assessee did not claim any expenditure relating to share investment activity in his profit and loss account. The assessee has charged all expenditure relating to share investment activity to his capital account. When the assessee did not claim any expenditure in the profit and loss account relating to share investment activity, in our view, the question of making any disallowance u/s. 14A of the Act does not arise. We noticed that an identical issue was considered by the Coordinate Bench in A.Y. 2012-13 (referred supra), and it has also taken view that the disallowance u/s. 14A of the Act is not called for, in the facts and circumstances of the case. The facts,

In the result, appeal filed by the Revenue is dismissed. Order has been pronounced in the Court on 4.2.2019.