CHANAKYA INTERNATIONAL PVT. LTD.,MUMBAI vs. DCIT - 5(1)(2), MUMBAI
In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that the Assessing Officer did not provide valid reasons to reject the assessee's disallowance computation. The additional disallowance made mechanically under Rule 8D(2) was unsustainable, especially in light of previous Tribunal decisions in the assessee's own case.
What were the facts?
The assessee voluntarily disallowed an amount under Section 14A for exempt dividend income. The Assessing Officer, however, made a higher disallowance under Rule 8D(2), which was upheld by the CIT(A). The assessee challenged this additional disallowance before the ITAT.
What were the issues?
Whether the Assessing Officer can make a higher disallowance under Section 14A read with Rule 8D when the assessee has already made a voluntary disallowance, without demonstrating the inadequacy of the assessee's computation.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cases cited in this judgment(1)Show listHide list
Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.
- Godrej & Boyce Mfg. Co. Ltd. v. DCIT1,183 citing328 ITR 81 · 2010 · HC · Read judgment
Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY
Date of Hearing –07.03.2019 Date of Order – 15.04.2019
O R D E R PERSAKTIJITDEY, J.M.
Aforesaid appeal has been filed by the assessee challenging the 22nd order dated November 2017, passed by the learned Commissioner (Appeals)–10, Mumbai, pertaining to the assessment year 2012–13, 2013–14 and 2014–15. However, in the present appeal, I am concerned with assessment year 2012–13 only.
2 Chanakya International Pvt. Ltd.
At the outset, learned Counsel for the assessee, on instructions,submitted that he does not want to press ground no.II, due to smallness of the addition. Hence, this ground is dismissed.
In ground no.I, the assessee has challenged disallowance of ` 15,24,193, under section 14A r/w rule 8D.
Brief facts are, in the course of assessment proceedings for the impugned assessment year, the Assessing Officer noticed that as against the exempt income earned by way of dividend amounting to ` 1,52,94,700, the assessee has disallowed an amount of ` 15,09,846, under section 14A. When the Assessing Officer called upon the assessee to justify the disallowance made under section 14A of the Act qua the exempt income earned, the assessee submitted that it being involved in garment business most of the expenditure is incurred for the purpose of business and the disallowance voluntarily made under section 14A of the Act is more than reasonable and no further disallowance should be made. The Assessing Officer, however, did not accept the contention of the assessee. He observed, out of the disallowance made by the assessee under section 14A r/w rule 8D, an amount of ` 8,95,712 is expenditure directly related to earning of exempt income. In addition to such direct expenditure, the assessee has disallowed a further amount of ` 6,14,134. Being of the opinion
3 Chanakya International Pvt. Ltd. that the disallowance made by the assessee is not in accordance with the provisions contained under rule 8D(2), the Assessing Officer proceeded to compute disallowance under the said provision at ` 30,34,039, comprising of direct expenditure of ` 8,95,712 and administrative expenditure of ` 21,38,327, being 0.5%of the average value of investment. The assessee having already disallowed an amount of ` 15,09,846, the Assessing Officer added back the balance amount of ` 15,24,193.
Though, the assessee challenged the aforesaid disallowance before learned Commissioner (Appeals), however, he upheld the disallowance made by the Assessing Officer.
The learned Authorised Representative reiterating the stand taken before the Departmental Authoritiessubmitted, the Tribunal has decided the issue in favour of the assesseein assessment year 2008– 09 and 2009–10 by restricting such disallowance under section 14A of the Act to the amount already disallowed by the assessee. However, he fairly submitted, while deciding assessee’s appeal for assessment year 2010–11, the Tribunal has upheld the disallowance made by the Assessing Officer. The learned Authorised Representative submitted, in assessment year 2011–12 also, the Tribunal has decided the issue in favour of the assessee. He submitted, the Assessing Officer has not 4 Chanakya International Pvt. Ltd.
shown any valid reason as to why the disallowance computed by the assessee is not allowable having regard to its books of account. Thus, he submitted, the disallowance made should be deleted.
The learned Departmental Representative relying upon the observations of the learned Commissioner (Appeals) and the Assessing Officer submitted that the disallowance under section 14A of the Act has to be made in the manner prescribed under rule 8D(2). Therefore, no fault can be found with the Assessing Officer as he has computed the disallowance by following rule 8D(2).
I have heard rival submissions and perused material on record. Undisputedly, in the relevant previous year, the assessee has earned dividend income of ` 1,52,94,700, which was claimed to be exempt. It is also a fact that the assessee has voluntarily disallowed an amount of ` 15,09,846 under section 14A r/w rule 8D. The assessee has also made submissions before the Assessing Officer justifying the computation of disallowance under section 14A of the Act. On a perusal of the impugned assessment order, it appears, the Assessing Officer has not shown any valid reason why the disallowance computed by the assessee under section 14A r/w rule 8D is not correct having regard to the books of account maintained by him. Without demonstrating that the disallowance computed by the assessee having
5 Chanakya International Pvt. Ltd. regard to the books of account is incorrect, the disallowance made by the Assessing Officer mechanically under rule 8D(2) is unsustainable. The ratio laid down in various judicial precedents including the decision of the Hon'ble Jurisdictional High Court in Godrej & Boyce Mfg. Co. Ltd. v/s DCIT, [2010] 328 ITR 81 (Bom.), also support this view. In fact, in assessee’s own case for the assessment year 2008–09, 2009–10 and 2011–12, the Tribunal has struck down the disallowance made by the Assessing Officer under section 14A of the Act r/w rule 8D for the aforesaid reason. Though, a contrary view was taken by the Tribunal in assessment year 2010–11, however, it was on the basis of facts involved in that assessment year. In view of the aforesaid, I hold that the additional disallowance made by the Assessing Officer under section 14A of the Act deserves to be deleted. Accordingly, I do so. Ground is allowed.
In the result, appeal is allowed. Order pronounced in the open Court on 15.04.2019
More judgments on Section 14A
- Blacksoil Capital Private Limited (As… vs DCIT, Circle-1(1), HyderabadITA 2217/HYD/2026[2017-18]Status: Disposed9 Oct 2026AY 2017-18
- Hiral Construction, Mumbai vs ITO Ward 42(1)(2), MumbaiITA 8431/MUM/2025[2017-18]Status: Disposed8 Oct 2026AY 2017-18
- The Dy DIT (It) 1(2), Mumbai vs M/S Citi Bank N.A, MumbaiITA 4981/MUM/2007[2002-2003]Status: Disposed8 Oct 2026AY 2002-2003
- M/S. Citi Bank N.A., Mumbai vs The Addl DIT (It) RG-1, MumbaiITA 4970/MUM/2007[2002-2003]Status: Disposed8 Oct 2026AY 2002-2003
- M/S American Express Bank Ltd., Mumbai vs The Jt DIT (It)1(1), MumbaiITA 9414/MUM/2004[2000-2001]Status: Disposed8 Oct 2026AY 2000-2001
Recent GST High Court judgments
Search GST case law →- Basant Kumar Gupta vs. Union Of INDIAPatna · 2 Nov 2026
- M/S Swapnashiyana Homes Developers Private Limited vs. The Union Of INDIAPatna · 2 Nov 2026
- M/S B.K. Agency Under The Proprietor Of Bhola Prasad vs. The Chief Commissioner, CGSTPatna · 2 Nov 2026
- Shree Hanumant Steel Traders vs. Assistant CommissionerChhattisgarh · 1 Nov 2026
- R.K.Service Station, Balasore vs. Commissioner CT And GST Odisha, CuttackOrissa · 31 Oct 2026