CHANAKYA INTERNATIONAL PVT. LTD.,MUMBAI vs. DCIT - 5(1)(2), MUMBAI

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

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.

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

In the result, appeal is allowed. Order pronounced in the open Court on 15.04.2019