Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “D”, BENCH KOLKATA
Before: SHRI S.S. Viswanethra Ravi, JM & DR. A.L.SAINI, AM
Per Dr. Arjun Lal Saini, AM:
1. The captioned appeal filed by the assessee, pertaining to assessment year 2013- 14, is directed against the order passed by ld. Commissioner of Income Tax (Appeals)-9, Kolkata in dated 16-01- 2018, which in turn arises out of an order passed by the Assessing Officer u/s. 143(3) of the Income-Tax Act, 1961 (in short, the Act), dated 15-01-2016.
The solitary grievance of the assesse in this appeal is that the ld. CIT(A) has erred in confirming the disallowance of Rs.2,84,534/- made by the AO u/s. 14A/r.w.r 8D of the IT Rules, 1962.
The brief facts qua the issue are that during the assessment proceedings, the assessing officer noted that the assessee in his books of accounts, has debited various expenses and some of those expenses were utilized for generating exempt income. All these expenses were to a certain extent related to investment in shares and capable of generating non-taxable income. Moreover, the assessee had to keep track of various dividend incomes declared by the invested companies and also to keep track of the dividend income having been regularly received by the assessee. The assessee also could not furnish any explanation regarding the expenses related to exempted income. The ld AO noted that the assessee has no objection towards disallowance u/s 14A of the I.T. Act, 1961, read with rule 8D of the Income Tax Rules, 1962. In view of the above facts of the case, disallowance u/s. 14A of the Income-tax Act, 1961 read with Rule-8D of the Income-tax Rules, 1962 was computed by the AO as under:
Direct Expenses on Investments Rs. 5,442/- (A) 2. Interest Paid NIL (B) 3. Value of Investments at the end of the Year Rs.6,93,50,291/- 4. Value of Investments at the beginning of the Year Rs.4,22,86,608/- 5. Average Value of Investments Rs.5,58, 18,449.50 (C ) 6. Total Assets at the end of the Year Rs.17,57,91,627/- 7. Total Assets at the beginning of the Year Rs.14,66,32,871/- 8. Average Value of Total Assets Rs.16,12,12,249/- (D)
Disallowance u/s.14A = A + B X C/D + 0.5% of C , = Rs.5,442 + 0 + ½ % of Rs.5,58,18,449.50/- = Rs.5,442 + Rs.2,79,092 = Rs.2,84,534/- Therefore, amount of Rs.2,84,534/- was disallowed and added to the income of the assessee.
Aggrieved by the stand so taken by the AO the assesse carried the matter in appeal before the ld. CIT(A), who has confirmed the addition made by the AO, observing the followings:-
“4.1 I have gone through the Assessment order and submissions of the Appellant and case was discussed with the A/R of the appellant. The A/R has not been able to point out any infirmity in the disallowance made u/s. 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962”
Aggrieved by the impugned order of the ld. CIT(A) the assesse is in appeal before us.
The ld. Counsel for the assesse submitted before us that the assesse is a salaried employee and earned income under the head ‘income from other sources’ by way of dividend and interest income. The assessee under consideration received dividend M/s. Mahendra Kumar Bachchwat income, which is exempted from tax. The assessee made disallowance suo motu ofdirect expenses to the tune of Rs.5,542/- on account of Deemat Charges. In addition to this, the assesse has debited the expenses in his Profit and Loss account to the tune of Rs.17,083/-. Therefore, the ld. Counsel for the assesse has submitted before the Bench that the disallowance, if any, under section 14A/r.w.r 8D should not exceed the expenditure debited in the Profit and Loss account.
On the other hand, the ld. DR for the revenue has primarily reiterated the 7. stand taken by the AO, which we have already noted in our earlier para and is not being repeated for the sake of brevity.
8. We have given a careful consideration to the rival submissions and perused the material available on record. We note that the AO made disallowance under Rule 8D(2)(iii) to the tune of Rs, 2,84,534/- taking into account, the average investments of all the investments. The assesse submitted before us that he has suo motu disallowed of Rs. 5,542/- under Rule 8D(2)(i) on account of Demat charges incurred by him. We noted from the profit and loss submitted by the assessee that the total expenses debited by the assessee is to the tune of Rs.17,083/-. Therefore, the maximum disallowance under section 14A read with rule 8D ( for earning exempt income) cannot be more than Rs.17,083/-. The ld DR for the Revenue fairly agreed with the Bench that maximum disallowance under section 14A read with rule 8D cannot exceed the total expenses debited by the assessee in his profit and loss account. Therefore, the expenses for earning exempt income could be disallowed to the extent of Rs.17,083/-, which has been debited in the Profit and loss account. Therefore, we direct the AO to disallow only the total expenditure to the tune of Rs.17,083/-, this is in addition to suo-moto expenses disallowed by assessee of Rs.5,442/-.
In the result, the appeal of the assessee is partly allowed.