DCIT, CIRCLE - 10(1), KOLKATA, KOLKATA vs. SHRI JAIDEEP HALWASIYA, KOLKATA

The assessee in the present case is an individual, who is engaged in the business of providing consultancy services. The return of income (revised) for the year under consideration was filed by him on Assessment year: 2013-2014 Page 2 of 4 22.11.2013 declaring total income of Rs.99,80,200/-. In the said return, deduction of Rs.1,98,49,627/- was claimed by the assessee on account of interest expenditure incurred in respect of unsecured loans. As found by the Assessing Officer, unsecured loans availed by the assessee were partly utilized for making investment in shares, the income from which was exempt from tax. He, therefore, applied Rule 8D(ii) and worked out the interest expenditure incurred in relation to the exempt income at Rs.99,11,183/- and made a disallowance to that extent under section 14A. He also invoked Rule 8D(iii) and made a further disallowance of Rs.18,73,772/- under section 14A being 0.5% of the average value of investment made by the assessee in shares. Accordingly, total disallowance of Rs.1,17,84,955/- was made by the Assessing Officer under section 14A in the assessment completed under section 143(3) vide an order dated 30.12.2015.

Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee before the ld. CIT(Appeals) and after considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) decided the issue relating to disallowance under section 14A vide his impugned order as under:- “The AO has made disallowance of Rs.99,11,183/- under Rule 8D(iii). However, the assessee has submitted that he has suo motto disallowed interest expenditure of Rs.1,21,44,440/-. As per the AR, the assessee has made interest payment of Rs.3,19,94,031/- while in the computation of income, the assessee has claimed an interest deduction of only Rs.1,98,49,627/-. Since the assessee has himself disallowed higher amount of interest, therefore, no disallowance under Rule 8D(ii) can be made. The AO may verify the same and allow appropriate relief. The AO has further disallowed Rs.18,73,772/- under Rule 8D(iii). The ld. AR stated that the assessee has not claimed any overhead expenses and, therefore, no such disallowance can be made. The assessee has relief on the following case laws:- (1) Justice Sam P. Bharucha –vs.- ACIT, ITA No. 3889/MUM/2011;

Assessment year: 2013-2014 Page 3 of 4 (2) Modern Info Technology P. Ltd. –vs.- ITO, (3) ACIT –vs.- Iqbal M. Chhagala, ITA No. 877/MUM/2013.

We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that out of the total deduction claimed by the assessee on account of interest amounting to Rs.1,98,49,627/-, disallowance of Rs.99,11,183/- was made by the Assessing Officer under section 14A by applying the formula given in Rule 8D(ii) of the Income Tax Rules, 1962. Before the ld. CIT(Appeals), it was pointed out by the assessee that the total interest expenditure of Rs.3,19,94,031/- was incurred by him during the year under consideration and out of the same, interest expenditure to the extent of Rs.1,21,44,440/- was suo motu disallowed by the assessee under section 14A. Since the disallowance so offered by the assessee suo motu on account of interest expenditure was higher than the disallowance made by the Assessing Officer by applying Rule 8D(iii), the ld. CIT(Appeals) held that there was no case to make a disallowance by the Assessing Officer under Rule 8D(ii). He accordingly directed the Assessing Officer to verify the claim of the assessee and allow appropriate relief on such verification. Keeping in view all these facts and circumstances of the case, we find no infirmity in the impugned order of the ld. CIT(Appeals) which can be said to have caused any grievance to the revenue and even the ld. D.R. has not been able to raise any material contention in this regard. Similarly the ld. D.R. has not been able to bring anything on record to rebut or controvert the finding recorded by the ld. CIT(Appeals) in the impugned order that no overhead expenses were claimed by the assessee

In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on September26, 2018.