M/S. WELKNOWN FINANCIAL SERVICES PVT. LTD.,KOLKATA vs. ITO, WARD - 6(4), KOLKATA, KOLKATA

The assessee in the present case is a Company, which filed its return of income for the year under consideration on 29.09.2012 declaring a loss of Rs.15,03,454/-. In the said return, dividend income of Rs.2,83,320/- on investment in shares was claimed to be exempt by the assessee under section 10(34) of the Act and disallowance of Rs.1,62,928/- was offered by the assessee under section 14A on account of expenses incurred for earning the exempt dividend income. The Assessment Year: 2012-2013 M/s. Welknown Financial Services Pvt. Limited Assessing Officer was not satisfied with the quantum of disallowance offered by the assessee under section 14A. He invoked Rule 8D and worked out the expenses incurred by the assessee for earning the exempt dividend income at Rs.9,32,136/- and made a disallowance to that extent under section 14A in the assessment completed under section 143(3) vide an order dated 16.02.2015. On appeal, the ld. CIT(Appeals) confirmed the disallowance made by the Assessing Officer under section 14A read with Rule 8D. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.

We have heard the arguments of both the sides and also perused the relevant material available on record. The limited contention raised by the ld. Counsel for the assessee is that the disallowance under section 14A cannot exceed the exempt income in the form of dividend actually earned by the assessee during the year under consideration. He has contended that since the exempt income in the form of dividend actually earned by the assessee during the year under consideration was only of Rs.2,88,320/-, the disallowance under section 14A cannot exceed Rs.2,83,320/-. Since this contention of the ld. Counsel for the assessee is duly supported by the decision of the Hon’ble Delhi High Court in the case of Joint Investments Pvt. Limited –vs.- CIT [372 ITR 694] and the ld. D.R. has also not disputed this position, we restrict the disallowance of Rs.9,32,136/- made by the Assessing Officer under section 14A and confirmed by the ld. CIT(Appeals) to Rs.2,83,320/- and allow this appeal of the assessee partly.

In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on February 12, 2019.