LATE SHRI MOHAN V. BHATIYA,MUMBAI vs. ITO 2(1)(1), MUMBAI

The Ld A.R submitted that the assessee earned dividend income of Rs.17.29 lakhs and did not make any disallowance u/s 14A of the Act for the reason that the expenditure incurred by the assessee were towards telephone (Rs.12,188/-) and audit fee (Rs.22,472/-) only. However the AO computed the disallowance as per Rule 8D(2)(iii) and the same was also confirmed by the Ld CIT(A). The Ld A.R submitted that the Delhi bench of Tribunal has held in the case of Modern Info Technology P Ltd Vs. ITO (ITA No.4294/Del/2002 dated 19-10- 2012) that the disallowance computed u/s 14A cannot exceed actual expenditure claimed by the assessee.

The Ld D.R, on the contrary, supported the orders passed by the tax authorities.

I heard the parties and perused the record. I notice that the Delhi bench of Tribunal in the case cited above has held that the no disallowance u/s 14A is called for when the assessee has not incurred and claimed any expenditure for earning exempt income. It was further held in the case before the Delhi bench that the disallowance should be restricted to the actual amount of expenditure claimed by the assessee. In the instant case also, the assessee has claimed expenditure towards telephone bill and audit fee only. No other expenditure has been claimed by the assessee. Accordingly, by following the decision of Delhi bench of Tribunal referred above, I direct the AO to restrict the disallowance to the actual amount of expenditure incurred and claimed by the assessee. The order passed by Ld CIT(A) on this issue would stand modified accordingly.

In the result, the appeal of the assessee is allowed. Order has been pronounced in the Court on 2.5.2017.