ACIT CIR 6(3)(2), MUMBAI vs. KREDENCE MULTI TRADING CO., MUMBAI

आदेश / O R D E R Per Joginder Singh(Judicial Member) The Revenue is aggrieved by the impugned order dated 30/11/2016 of the Ld. First Appellate Authority, Mumbai, restricting the disallowance of Rs.57,94,173/- made under section 14A of the Income Tax Act, 1961 (hereinafter the Act) read with Rule-8D of the rules, to the extent of exempt income of Rs.2,49,084/-, claimed by the assessee, ignoring the CBDT Circular No. 5/2014 dated 11/02/2014.

2.1. We have considered the submissions of Ld. DR and perused the material available on record. The facts, in brief, are that the assessee is a limited company engaged in trading of iron and steel and shares/securities, declared income of Rs.3,54,65,793/- in its return, filed on Kredence Multi Trading Ltd. 28/09/2012, which was processed under section 143(1) of the Act, subsequently, the case of the assessee was selected for scrutiny, therefore, notice under section 143(2) and 142(1) were served upon the assessee. The assessee attended the proceedings from time to time and furnished necessary details. During the concerned year, the assessee earned dividend income of Rs.7,49,805/- on old share investment, which was claimed exempt under section 10(34) of the Act.

The assessee earned profit of Rs.10,72,550/- on sale of mutual fund and also incurred loss of Rs.15,73,271/-, aggregating net loss of Rs.5,00,721/- on sale of mutual fund.

Before the ld. Assessing Officer, the assessee claimed that it did not incur any expenditure for earning dividend income on shares except of Rs.73,614/- as direct expenses, which were disallowed by the assessee itself in its computation. It was claimed by the assessee that exempt income of Rs.2,49,084/- is covered by the decision in the case of Daga Global Chemicals, wherein, it was held that disallowance under section 14A r.w.r.8D should not exceed the exempt income.

However, the ld. Assessing Officer made the addition. On appeal before the Ld. Commissioner of Income Tax (Appeal),

Kredence Multi Trading Ltd. the factual matrix was considered and following various decisions in CIT vs SBI DHFL Ltd. (2015) 376 ITR 296 (Bom.), ACIT vs Bandekar Brothers Pvt. Ltd. (2015) 155 ITD 1171 and Auchtel Products Ltd. vs ACIT (2012) 52 SOT 39 (URO) and various other decisions, the Ld. Commissioner of Income Tax (Appeal) restricted the disallowance to the exempt income. No interest bearing funds were utilized for the purposes of investment. Considering the aforesaid decisions of the Tribunal, we are in agreement with the finding of the Ld. Commissioner of Income Tax (Appeal) that disallowance under section 14A of the Act r.w.r 8D of the Rules cannot exceed the exempt income. We affirm the conclusion drawn by the Ld. Commissioner of Income Tax (Appeal), therefore, the appeal of the Revenue is dismissed.

Finally, the appeal of the Revenue is dismissed.

This Order was pronounced in the open court in the presence of Ld. DR at the conclusion of hearing on 20/06/2018.