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Income Tax Appellate Tribunal, MUMBAI BENCH “E” MUMBAI
Before: SHRI JOGINDER SINGH & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year is 2010-11. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)- 32, Mumbai and arises out of the order u/s 143(3) of the Income Tax Act, 1961 (the ‘Act’).
The grounds of appeal filed by the assessee read as under:-
1. Commissioner of I.T. (A) erred in confirming further addition made by Assessing Officer u/s.14A of Rs1,37,030/- without considering fact that interest expenses is related to business activity of appellant and there is no borrowing made for investment.
2. Commissioner of I.T. (A) erred in confirming application of Rule 8D(2)(11) of section 14A, Without considering the fact that Net worth of appellant is more than Investments and no new Investment are made by Appellant during the year by borrowing.
3. Commissioner of I.T. (A) erred in confirming application of Rule 8D (2)(iii) being 0.5% of average investment by ignoring fact that all investments are in group companies for maintaining control of group and investment was out of own net worth and appellant need not incur any administrative expenses to earn exempt income.
3. The assessee has earned a dividend income of Rs.2,000/- on shares and claimed it as exempt u/s 10(34) of the Act. The Assessing Officer (AO) calculated the disallowance u/s 14A r.w.r. 8D of the Income Tax Rules 1962 and disallowed Rs.1,37,030/-. The assessee preferred an appeal against the order of the AO before the Ld. CIT(A). The Ld. CIT(A) agreed with the calculation of disallowance made by the A.O. u/s 14A r.w.r. 8D and dismissed the appeal filed by the assessee.
4. Before us, the Ld. Counsel of the assessee relied on the order of the ITAT ‘B’ Bench Mumbai in the case of Smt. Nirupma P. Shah vs. ACIT (ITA No.4544/Mum/2014). On the other hand, the Ld. DR supported the order passed by the Ld. CIT(A).
We have heard the rival submissions and perused the relevant material on record. We begin with the order of the Tribunal in the case of Smt. Nirupama P. Shah (supra) relied on by the Ld. Counsel of the assessee. In that case the Tribunal has followed the order in the case of Shri Harendra D. Shah (ITA No. 4367/Mum/2014) wherein, the following is held:
“7. The assessee has furnished the statement of investment made in shares of various companies. We notice that the total investment held in shares by the assessee is Rs.6.23 crores, out of which, the investment made in group companies stand at Rs.6.21 crores. Thus, we notice that the assessee has made investment of Rs. 2 lakhs only in other companies. Hence, there is merit in the contention of the assessee that 99.35% of investment have been made in the group companies as strategic investment to retain control over these companies. Further, we notice that the assessee is having its own funds of about 4.27 crores as on at the yearend as against the total investment of Rs.6.23 crores in shares. Hence, the investment of Rs. 2.00 lakhs made in other companies is sufficiently covered by the own funds. Further, the assessee earned dividend income of Rs.2000/- only during the year under consideration. Hence, by following various decisions relied upon by the assessee the disallowance out of interest expenditure is not called for.
Under these set of facts and on a conspectus of the matter, we are of the view that the disallowance made u/s 14A should be restricted to the dividend income of Rs.2000/-. Accordingly, we set aside the order of Ld. CIT(A) and direct the AO to restrict the disallowance to Rs.2000/-.” 5.1. Facts being similar, we follow the above order of the Tribunal and set aside the order of the Ld. CIT(A) on the above issue and restore the same to the file of the AO to verify the details as mentioned at para 5 here- in-above and pass an order after giving reasonable opportunity of being heard to the assessee. The assessee is directed to file the relevant details as mentioned at para 5 here-in-above.
In the result, appeal is allowed for statistical purposes.
Order pronounced in the open Court on 24/04/2017