DCIT CIR 3(3)(1), MUMBAI vs. SMITA CONDUCTORS LTD, MUMBAI

आदेश / O R D E R PER R.C.SHARMA (A.M):

M/s. Smita Conductors Ltd., 4. We have considered the rival contention of the parties and gone through the orders of authorities below. We have noticed that the assessee earned dividend income of Rs.2,03,22,503/- and profit from partnership of Rs. 14,186/-which were claimed exempted by the assessee. The AO asked the assessee to furnish the details of the expenses incurred for earning exempt income. The assessee furnished its explanation along with the details of exempt income, profit and loss account and the balance sheet. The AO has not discussed in his order about the statement of account and the details of expenses incurred by the assessee, which was furnished before him during the assessment proceedings. The AO has not rejected the accounts filed by assessee. The AO invoked the provision of rule 8D for making disallowance u/s 14A. The AO disallowed Rs. 26,82,784/- under rule 8D(ii) and Rs. 6,01,991/-under rule 8D(iii). We have seen that assessee was having sufficient interest on the free fund available. The assessee had a reserve and surplus fund of Rs. 28,42,58,814/- as on 31st March 2008. The assessee made the investment of Rs. 17,01,81,310/ - in mutual funds during the year under consideration. Thus, keeping in view the fact and circumstances of the case, we deem it appropriate that a lump sum disallowance of Rs. 25,000/-under section 14A would meet the end of Justice. Hence the AO is directed to restrict the disallowance under section 14 A to Rs. 25,000/- . In the result this ground of appeal is partly allowed.