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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER VIKAS AWASTHY, JM
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-7, Pune dated 21.01.2016 for the assessment year 2009-10.
The assessee in appeal has assailed the findings of the Commissioner of Income Tax (Appeals) on two counts viz.
2 ITA No.837/PUN/2016 A.Y.2009-10
(i) Disallowance of expenditure u/s. 14A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) Rs.3,91,591/-.
(ii) Disallowance of expenses Rs.51,048/-on account of software, classified under the head “Office Expenses” being capital in nature
Shri C. H. Naniwadekar appearing on behalf of assessee submitted at
the outset that the issue raised in ground No. 2 is not pressed on account of
smallness of amount involved.
3.1 In respect of ground No. 1, the ld. AR submitted that the assessee has
not claimed any expenditure on exempt income. The assessee has not
received any dividend income during the period relevant to assessment year
under appeal. The dividend received on investment is re-invested. The ld. AR
pointed that disallowance u/s.14A of the Act on similar set of facts was
made in the assessment year 2010-11. The assessee carried the matter in
second appeal before the Tribunal in ITA No.548/PN/2014. The Tribunal
vide order dated 27.07.2016 restricted the disallowance u/s.14A of the Act
to Rs.75,000/- as against disallowance of Rs.5,63,520/- made u/s.14A r.w.
Rule 8D by the Department. The facts in the present case are identical;
therefore, disallowance u/s.14A of the Act may be made on similar terms in
assessment year 2009-10.
Shri Mukesh Jha representing the Department vehemently defending
the order of Commissioner of Income Tax(Appeals) submitted that the
Commissioner of Income Tax (Appeals) has confirmed disallowance under
Rule 8D(2)(iii) of the Income Tax Rules, 1962 (in short ‘the Rules’). The
assessee has not made any suo-moto disallowance in respect of
administrative expenses.
3 ITA No.837/PUN/2016 A.Y.2009-10
We have heard the submissions made by representatives of rival sides
and have perused the orders of Authorities below. We have also considered
the decision of the Co-ordinate Bench of Tribunal in assessee’s own case for
assessment year 2010-11 wherein identical issue in respect of disallowance
u/s.14A r.w. Rule 8D of the Rules was adjudicated. It is an admitted fact
that there has been no change in the facts and circumstances in the present
case. The assessee has made investments in Mutual Funds and the
dividend received is re-invested by the assessee. Under similar facts and
circumstances, the Tribunal in assessment year 2010-11 has held as under:
“9. Disallowance u/s. 14A : The Assessing Officer has made disallowance of Rs.5,63,520/- u/s.14A r.w.Rule 8D on account of administrative expenses incurred on investments. The contention of the assessee is that the assessee has made investment in Mutual Funds alone. To substantiate his contentions the assessee has placed on record account statements of various Mutual Funds at pages 3 to 30 of the paper book. Admittedly, the assessee has not made any disallowances in respect of interest free income earned on investment made. The contention of ld. AR is that in all Mutual Funds where the assessee has made investment, dividend is reinvested in the Scheme. It has been further contended that Mutual Fund agencies recover the expenditure for managing portfolio at the time of investment or redemption as the case may be and accordingly adjust NAV of units purchased. The fact that the assessee has invested in Mutual Funds where the dividend income is reinvested in the scheme has not been disputed by the Department. After considering the totality of the facts we are of the view that the assessee must have been incurring some administrative cost in managing the Mutual Funds. Therefore, to meet the ends of justice we disallow Rs.75,000 /- u/s.14A of the Act as expenditure towards earning of interest free income. Accordingly, ground No. 1 raised in the appeal by the assessee is partly accepted.”
In line with the decision of the Co-ordinate Bench and taking into
consideration the entirety of facts, we deem it appropriate to restrict the
disallowance u/s.14A of the Act to Rs.1,00,000/- in respect of expenditure
incurred for earning interest free income. Accordingly, ground No. 1 raised
in appeal by the assessee is partly allowed.
4 ITA No.837/PUN/2016 A.Y.2009-10
In respect of ground No.2, the ld. AR stated at the Bar that he is not pressing the same. Accordingly, ground No. 2 raised in appeal by the assessee is dismissed as not pressed.
In the result, appeal of the assessee is partly allowed.
Order pronounced on Friday, the 22nd day of June, 2018
Sd/- Sd/- (डी. क�णाकरा राव/D. KARUNAKARA RAO) (�वकास अव�थी /VIKAS AWASTHY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER
पुणे / Pune; �दनांक / Dated : 22nd June, 2018 SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :
अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (Appeals)-7, Pune. 4. The CIT-6, Pune. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” ब�च, पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.