DCIT, CIRCLE-10(1), KOLKATA, KOLKATA vs. M/S ANJANA PROJECTS PVT. LTD., KOLKATA

Shri Arindam Bhattacjerhee, Addl. CIT-DR अपीलाथ� क� ओर से/By Appellant Shri Subash Agarwal, Advocate ��यथ� क� ओर से/By Respondent 06-02-2018 सुनवाई क� तार�ख/Date of Hearing 28-03-2018 घोषणा क� तार�ख/Date of Pronouncement आदेश /O R D E R PER Waseem Ahmed, Accountant Member:- This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-4, Kolkata dated 19.05.2016. Assessment was framed by DCIT, Circle-10(1), Kolkata u/s 263/143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated Nil for assessment year 2010-11. The Revenue has raised the following grounds:- “

1. Whether the Ld. CIT(A) was correct in giving fresh direction to the AO to segregate the opening and closing investment which actually yielded exempt income and to recomputed the disallowance made u/s. 14A read with Rule 8D(2)(iii)?

2. Whether the Ld. CIT(A) was correct in not appreciating the fact that Rule 8D(2)(iii) does not actually make any distinction into the investments whether they actually yielded exempt income or not?

DCIT Cir-10(1), Kol. Vs. M/s Anjana Projects Pvt. Ltd. Page 2 3. Whether the Ld. CIT(A) was correct in giving fresh direction to the AO. despite the fact that the constitutional validity of Rule 8D has been upheld by Bombay High Court Godrej & Boyce Mfg. Co. Limited vs. CIT [2010] 328 ITR 81 (Bom)(HC)? 4. That the appellant craves to add, delete or modify any of the grounds of appeal before or at the time of hearing.” Shri Arindam Bhattacherjee, Ld. Departmental Representative appeared on behalf of Revenue and Shri Subash Agarwal, Ld. Advocate appeared on behalf of assessee.

2. Inter-connected issue raised by Revenue in this appeal is that Ld. CIT(A) erred in directing the Assessing Officer to compute the disallowance u/s 14A of the Act r.w.s 8D(2)(iii) of the Income Tax Rule, 1962 on the basis of investments which have yielded dividend income.

3. Briefly stated facts are that assessee is an individual and engaged in business of investment and finance. The assessee during the year has earned dividend income of ₹24,62,121/- and long term capital gains on shares subject to Security Transaction Tax (STT for short) of ₹32,27,428/- which was claimed exempted from income tax. During the course of assessment proceedings, AO invoked the provisions of Rule 8D(2)(iii) of the IT Rules 1962 and made the disallowance of ₹7,04,931/- on account of administrative expense. The disallowance made by the AO was added to the total income of assessee.

4. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who directed the AO to make the disallowance under Rule 8D(2)(iii) of the IT Rules, 1962 after considering the investments which have yielded dividend income during the year. Aggrieved by the above finding of the Ld. CIT(A), the Revenue is in appeal before the Tribunal.

5. Before us Ld. DR relied on the order of AO. The ld. AR on the other hand relied the order of ld. CIT(A).

6. We have heard the rival contentions of both the parties and perused the materials available on record. It is settled proposition of law that for making the disallowance in respect of administrative expense under Rule 8D(2)(iii) of