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Income Tax Appellate Tribunal, KOLKATA BENCH “D”, KOLKATA
Before: SH. WASEEM AHMED & SH. S.S.VISWANETHRA RAVI
PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER
This appeal by the assessee against the order dated 31.01.2017 passed by CIT(A)-16, Kolkata for AY 2009-10.
The only issue emanates amongst three grounds raised by the assessee is as to whether the CIT(A) is justified in confirming the addition made by the AO by invoking Rule 8D(2)(ii) & (iii) of the Income Tax Rules, 1962 (in short “Rules”).
Briefly facts and circumstances of the case are that the assessee is a company engaged in the business of Tea manufacturing and growing. The AO found the assessee has earned dividend income and by invoking Rule 8D(ii) & (iii) disallowed Rs.8,92,570/- for the purpose of section 14A of the Act. The relevant portion of AO is reproduced hereunder:-
Computation of Disallowance Vis. 14A in view of Rule-8D : The assessee has earned dividend income and claimed it as exempted but did not make any provision for disallowance u/s. 14A, from the expenditure made. The assessee has incurred direct as well as indirect expenditure for earning exempt income. Since the assessee did not make any provisions for such disallowance u/s.14A, some disallowance u/s.14A has to be made since the assessee has incurred some expenditure for earning the exempt dividend income. Since no calculation is available hence, as per the ratio in the case of ITO -vs- Daga Capital Market Pvt. Ltd. (2009) 312 ITR I (SB)(Mumbai) disallowance u/s. 14A read with rule 8D has to be made. The computation of which is given as under. I. Direct Expense relating to exempt income - Demand charges Nil 11. A. Interest debited to P/L A/c= 1279440 B. Average Value of investment = 89372395 C. Average value of total Assets = 150407520 Ax B/C 760245 III 0.5% of 9372395 (Average value of investment) 446862 Total disallowance u/s.14A 1207107 Less: Disallowance by assessee 314537 892570 (Addition Rs.892570/-) 4. The CIT(A) placing reliance on the decision of Hon’ble Special Bench of ITAT in the case of Daga Capital Marchant 312 ITR 1 (SB) [Mumbai] confirmed the addition made by the AO. The relevant portion is reproduced hereunder:-
3. “Grounds 1 to 3 are disallowance of Rs.8,92,570/- u/s 14A of the IT Act. The AO has made the addition as the assessee has earned dividend income and did not make disallowance u/s 14A. The A.O. has relied upon the decision of Hon'ble Special Bench of ITAT in the case of ITO vs. Daga Capital Marchant 312 ITR (1) SB Mumbai. The Assessee filed various details that it itself has disallowed 314537 u/s 14A and no further disallowance is needed. But again in the remand proceedings of the A.O. no proper submission was made to segregate expenses and investments. Hence, the disallowance of the A.O. worth Rs. 8,92,570/- is confirmed, and the appeal of the assessee is dismissed.”
Before us, Ld. AR submits that the AO has considered entire investments and disallowed impugned amount of Rs.8,92,570/- which was confirmed by the CIT(A) which is incorrect. The AO ignored our calculation in respect of those investments which has given exempt income. Further, Ld.AR argued that the AO should take those investments which have been yielded exempt income for the purpose of working of disallowance u/s 14A of the Act. The respondent-Revenue accepted the calculations submitted by the assessee in this respect for AY 2008-09 and prayed to remand the matter to the file of the AO for a fresh consideration to work out disallowance taking into consideration those investments which have been given exempt income. The Ld.DR submits that the assessee did not give any calculations in the original assessment proceedings as well as in the remand proceedings and referred to para 3 of the CIT(A) and argued that the assessee failed to segregate the expenses and investments and supported the orders of both the authorities below.
Heard rival submissions and perused the material available on record. It is also noted from the order of CIT(A) in para No.3 that no proper submission was made to segregate expenses and investments, which is, in our opinion, is necessary for working out expenses that may have been incurred in earning the exempt income and the arguments of the Ld.AR was that any disallowance should relate to those investments which yielded exempt income in such circumstances, taking into consideration the facts & circumstances of the case, we deem it proper to remand the file of the AO for his fresh consideration to work out the expenses relating those investments which yielded exempt income. The assessee is directed to file all relevant details in this regard segregating the expenses and investments. Thus, Grounds No.1 to 3 raised by the assessee are allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 18.07.2018.