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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI JOGINDER SINGH & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 24.10.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2013-14.
The only effective issue raised by the assessee in the grounds of appeal is against the confirmation of disallowance of Rs.1,52,080/- by Ld. CIT(A) as made by the AO under section14A rule 8D.
The facts in brief are that the assessee during the year has earned dividend income of Rs.55,073/- which was claimed as exempt while not making any disallowance of expenses
2 M/s. Cello Sonal Construction attributable to earning of such exempt income under section 14A of the Act rule 8D of ITAT Rules . Accordingly, the AO issued a show cause notice as to why the provisions of section 14A rule 8D should not be applied and finally after considering the reply of the assessee added a sum of Rs.1,52,018/- comprising Rs.1,22,604/- under rule 8D(2)(ii) and Rs.29,414/- under rule 8D(2)(iii) which was confirmed by the Ld. CIT(A).
Now after hearing both the parties and perusing the material on record including the impugned order, we observe that the assessee’s own funds are far more than the investments in the securities yielding tax free income and therefore no disallowance under rule 8D2(ii) is called for. So far as the disallowance under rule 8D2(iii) is concerned, we are of the view that the income during the year was only Rs.55,073/- while the disallowance as made by the AO towards indirect expenses is Rs.29,414/- which comes to 53.41% of the income which in no way can be held to be justified. Therefore, considering exorbitant quantum of disallowance, we are not satisfied with the reasonability of the same. Therefore, we are inclined to restrict the disallowance to a sum of Rs.10,000/-. Consequently, the assessee gets a relief of Rs.14,208/- and a sum of Rs.10,000/- is sustained.
In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on 17.09.2018.