INSTANT HOLDINGS LTD,MUMBAI vs. DCIT RG 6(2), MUMBAI

The first grievance of the assessee in its appeal is that the CIT(A) erred in confirming the action of the Assessing Officer in disallowing expenses of Rs.20,00,000/- out of Rs.29,05,000/- debited to its Profit and Loss Account u/s.14A of the Act.

Briefly stated facts are that the assessee is an investment company filed return of income on 29.09.2008 declaring income of Rs.1,04,23,294/-. The assessment was completed on 10.12.2010 u/s.143(3) of the Act by determining the income at Rs.1,24,23,300/-. While completing the assessment, the Assessing Officer disallowed Rs.20,00,000/- u/s.14A Read with Rule 8D of the Act. The Assessing Officer noticed that the assessee has received dividend income of Rs.3,09,35,678/- and claimed as exempt u/s.10(34) of the Act. However, since no expenditure relating to this income was disallowed while computing the returned income the Assessing Officer worked out the disallowance under Rule 8D(iii) of the Act i.e. 0.5% of average value of investments and arrived the disallowance of Rs.75,07,337/-. However, since the assessee debited total expenditure of Rs.29.05 lacs to the Profit and Loss Account for the year under consideration the disallowance u/s.14A was restricted to Rs.20,00,000/- said to have been worked out in proportion of dividend income to total income. On appeal the CIT(A) sustained the disallowance made by the Assessing Officer.

Before us the learned counsel for the assessee submits that no expenditure was incurred by the assessee for earning dividend income except D-mat charges of Rs.414/-. It was further submitted that in the computation of income the assessee disallowed Rs.14,37,377/- out of total A.Y.2008-09 expenditure debited to Profit and Loss Account of Rs.29.05 lacs and what was claimed towards expenditure is about Rs.14.67 lacs only. Therefore, the counsel for the assessee submits that the disallowance u/s.14A of the Act should not exceed the expenditure claimed in the return of income i.e. Rs.14.67 lacs.

The DR supported the orders of the authorities below.

We have heard the rival submissions and perused the orders of the authorities below. The Assessing Officer while completing the assessment disallowed Rs.20,00,000/- being the expenditure attributable for earning dividend income. The Assessing Officer though calculated the disallowance to be made under Rule 8D(iii) of the Act at Rs.75,07,337/- since the assessee debited expenditure to the extent of Rs.29.05 lacs to the Profit and Loss Account he restricted the disallowance to Rs.20,00,000/- which the CIT(A) sustained. It is the contention of the assessee before us that in the computation of income the assessee disallowed Rs.14,37,337/- and only the remaining Rs.14.67 lacs was claimed as allowable expenditure, therefore the disallowance should not exceed Rs.14.67 lacs. On a perusal of computation of income we find that assessee added back the following expenditures to the income returned:-

Coming to the second issue in the appeal of the assessee, the assessee is challenging the order of the CIT(A) in disregarding the credit for TDS not allowed by the Assessing Officer to the extent of Rs.4,02,439/- The learned counsel for the assessee submits that assessee has filed petition u/s.154 of the Act for granting credit for TDS which is still pending before the Assessing Officer. He also submits that CIT(A) did not adjudicate on this issue for the reason that assessee filed rectification petition and the same is pending before the Assessing Officer. The learned counsel for the assessee prayed before us to give direction to disposed off petition u/s.154 of the Act and to consider for granting credit for TDS. The DR has no serious objection in directing the Assessing Officer to consider the plea of the assessee. A.Y.2008-09

On hearing both the sides we direct the Assessing Officer to disposed off the rectification petition filed by the assessee for granting credit for TDS. The ground raised by the assessee is also restore to the file of the Assessing Officer who shall was decide in accordance with law after providing adequate opportunity of being heard.

The ground no.3 in the grounds of appeal is related to levy of interest u/s.23A, 234B, 234C and 234D of the Act. Charging of interest is only consequential. Therefore this ground beingonly consequential the same is Dismissed.