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Income Tax Appellate Tribunal, KOLKATA BENCH “D” KOLKATA
Before: Shri Aby T. Varkeyand Dr.A.L. Saini
O R D E R
PER Dr. A.L. Saini, AccountantMember:
This captioned appeal filed by the Revenue, pertaining to Assessment Year 2010-11, is directed against an order passed by the Ld. Commissioner of Income Tax (Appeals)-18, Kolkata, in appealNo.452/CIT(A)-18/2010-11/Wd-10(2)/Kol,dated 04.08.2016, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), dated 22.03.2013. 2.The Revenue has raised the following grounds:- “
1) Whether the Ld. CIT(A) was correct in restricting in the addition of Rs.14,53,513/- being the amount of exempt ITO Wd-10(2) Kol. Vs. M/s Accord Capital Markets Ltd. Page 2 income for an identical amount without applying the provision of Rule 8D read with section 14A of the IT Act? 2) Whether the Ld. CIT(A) was correct in not following the decision of Special Bench of ITAT, Mumbai in the case of ITO Vs. Daga Capital Management Pvt. Ltd. (26 SOT 603) that permitted inclusion of stock in trade in the verge value of investment required to be worked out under Rule 8D? 3) That the appellant craves to add, delete or modify any of the grounds of appeal before or at the time of hearing.”
3. The solitary grievance of the Revenue in this appeal is that the Ld. CIT(A) was not correct in restricting the addition of ₹14,53,513/-, being the amount of exempt income for an identical amount.
4. Brief facts apropos this issue are that assessee-company is engaged in the business of share broker and dealing in share & securities during the assessment year under consideration. During the course of assessment proceedings, Assessing Officer noted that assessee received exempt income to the tune of ₹14,53,513/-, during the financial year 2009-10.The AO noted that in the profit and loss account, the assessee claimed different expense like interest and other expense which might have been incurred directly or indirectly to earn exempt income. When the assessee was asked in this regard, it was stated by the assessee that ₹6,40,372/- was disallowed suo-motu, as required u/s 14A r.w.s. Rule 8D of the IT Rules and computation was furnished before the Assessing Officer. The Assessing Officer further observed that assessee was carrying on share trading business in the course of which shares were held as trading stock, and such trading stock of shares produced dividend income which is exempt income u/s. 10(34) of the Act. The Assessing Officer noted that disallowance made by assessee in respect of expenditure ITO Wd-10(2) Kol. Vs. M/s Accord Capital Markets Ltd. Page 3 incurred against dividend income was not as per requirement of Secton14A r.w.s Rule 8D and therefore assessing officer worked out the disallowance as per Rule 8D and made addition of ₹1,35,05,609/-.Out of ₹1,35,05,609/- the assessee has already disallowed suo motu the amount of ₹6,40,372/-. Therefore, the Assessing Officer disallowed the balance amount of ₹1,28,65,237/- (₹1,35,05,609 - ₹6,40,372). 5.On appeal, Ld. CIT(A) restricted the addition u/s. 14A at ₹14,53,513/- holding that the disallowance u/s. 14A cannot exceed the amount of dividend earned. Not being satisfied with the order of Ld. CIT(A), the Revenue is in further appeal before us.
The Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer which were have already noted in our earlier para and is not being repeated for the sake of brevity.
On the other hand, Ld. counsel for the assessee has defended the order passed by Ld. CIT(A). The Ld. counsel for the assessee submitted before us that it is a settled position of law that the disallowance u/s.14A r.w.s. Rule 8D cannot exceed the dividend earned and therefore he relied on the order of Hon`ble ITAT, Mumbai in the case of M/s Daga Global Chemicals Pvt. Ltd. vs. ACIT in dated 01.01.2015, wherein it was held that disallowance u/s.14A r.w.s. Rule 8D cannot exceed the exempt income. 7.Having heard the rival submissions and perused the material available on record we note that in the assessee’s case under consideration the total exempt income earned by the assessee is at ₹14,53,513/-. We also note that assessee had disallowed suo