KIRLOSKAR PROPRIETARY LTD.,PUNE vs. ASSISTANT COMMISSIONER OF INCOME-TAX,

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.

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

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.

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

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

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.