SHRIRAM HOUSING FIANCE LTD.,CHENNAI vs. DCIT, CHENNAI

The assessee has raised several grounds in its appeal, however the crux of the issue is that the Ld. CIT(A) has erred in invoking the provisions of Section 14A read with Rule 8D of the rules and thereby disallowed the expenditure of Rs.5,29,831/-.

The brief facts of the case are that the assessee is a limited company engaged in the business of housing finance, filed its return of income for the assessment year 2013-14 on 27.09.2013. The case was selected up for scrutiny under CASS and finally orders U/s. 143(3) was passed on 25.03.2016 wherein the Ld.AO invoked the provisions of Section 14A read with Rule 8D (i, ii, & iii) and thereby disallowed Rs.6,59,062/- after rejecting the claim of the assessee that it had only incurred expenditure of only Rs.1,29,231/- which is attributable for earning exempt income as detailed herein below:-

On appeal, the Ld.CIT(A) held that the Ld.AO had given detailed reasons for making disallowance U/s.14A read with Rule 8D and therefore he confirmed the addition of Rs.5,29,839/- made by him .

Before us the Ld.AR submitted that the assessee had itself disallowed expenses that is attributable for earning exempt income for Rs.1,29,231/- and the details for the same was also furnished. Therefore further addition of Rs.5,29,839/- is not warranted. Hence it was pleaded that the same may be deleted.

On the other hand the Ld. DR submitted that the assessee had made investments to the extent of Rs.3,34,49,076/- for earning dividend income which is exempted from tax. Hence it was argued that the Ld.AO had rightly worked out the disallowance which is in accordance with Rule 8D of the Rules. It was therefore requested that the order of the Ld.AO may be confirmed.

We have heard the rival submissions and carefully perused the materials on record. Though the assessee had furnished details of certain salary expenses that is attributable for earning exempt income for making disallowance U/s. 14A of the Act, such disallowance alone will not suffice because allocation of other overheads which is attributable for earning exempt income has also to be taken into consideration for disallowance U/s.14A of the 4 Act. Further the complete details of the salary expenditure with respect to all the personnel involved in the decision making process for managing the mutual funds of the assessee is also not disclosed by the assessee. Therefore the claim of the assessee that it had only incurred Rs.1,29,231/- which is attributable for earning exempt income is not acceptable. Hence the Ld.AO has rightly computed the disallowance in accordance with Rule 8D of the rules which has been upheld by the Ld.CIT(A). For the above stated reasons, we do not find it necessary to interfere with the order of the Ld.CIT(A) with this issue.

In the result appeal of the assessee is dismissed.