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Income Tax Appellate Tribunal, “D”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD, JM
आदेश / O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the assessee against the order of CIT(A)- 7, Mumbai dated 29/09/2014 in the matter of order passed u/s.143(3) of the IT Act. 2. The only grievance of the assessee relates to disallowance of 0.5% of average value of investment u/s.14A of the IT Act. 3. Rival contentions have been heard and record perused. 4. Facts in brief are that the assessee is engaged in the business of finance and trading in accessories, decorative and antique goods and consultancy services. The return of income was filed on 01.08.2011 declaring total income of Rs.1,45,20,878/- consisting of business loss, long term (non STT Paid) and short term capital gains and income from Ranjit Gobindram Malkani other source. The assessee claimed exempt income from long term capital gain being dividend, interest on tax free bonds. The return of income was revised on the same date i.e 01.08.2011 declaring total income of Rs.1,55,30,878/- including the salary income of Rs. 10,10,000/- which missed to be included in the original return. The AO completed the assessment u/s 143 (3) of the Act assessing total income at Rs.1,67,41,840/- after making disallowance of Rs. 12,10,965/- u/s 14A being expenses calculated as per Rule 8D being 0.5% of average value of investments. By the impugned order CIT(A) confirmed the addition and assessee is in appeal before us.
It was contended by learned AR that as per business balance sheet of the assessee there are no investments earning exempt income accordingly it was claimed that provisions of Section 14A are not applicable to the assessee. The exempt income has been earned by the assessee from personal investments, the related expenses are debited to personal capital account and the assessee has not claimed these expenses against this exempt income. The assessee contended that whatever expenses are incurred and claimed are against the taxable income and these expenses have been incurred for the purposes of business having no nexus with investments income from which is exempt. This fact is not disputed by AO.
On the other hand, learned DR relied on the order of the lower authorities.
Ranjit Gobindram Malkani 7. We have considered rival contentions. Disallowance u/s. 14A can be made only in respect of the expenditure claimed in the profit and loss account against income liable to tax meaning thereby if no expenditure of exempt income have been claimed against the income liable to tax, no disallowance is warranted for such expenditure. As per learned AR, the alleged expenditure was debited by the assessee in his personal account and not claimed in the P & L account of business income which was offered for tax. In the interest of justice, we restore the matter back to the file of AO with a direction to verify if the expenditure so disallowed have not been claimed by assessee against the taxable income and have been debited only in the personal capital account, no disallowance is warranted. We therefore, direct the AO to compute the disallowance afresh in terms of our above direction. We direct accordingly.