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Income Tax Appellate Tribunal, BENCH “B” MUMBAI
Before: SHRI D.T.GARASIA, JM & SHRI RAJESH KUMAR, AM
PER RAJESH KUMAR, Accountant Member:
The assessee has filed this appeal challenging the order dated 26.9.2013 passed by the ld.CIT(A)-12, Mumbai for the assessment year 2009-10 wherein it has raised following grounds of appeal: “1. On the facts and the circumstances of the case, the ld. CIT(A)-1 erred in making a disallowance u/s 14A amounting to Rs.4,22,992/-;
2. On the facts and circumstances of the case and in law the CIT(A) failed to appreciate that the dividend received was only Rs.20,000/-
2. Only issue raised by the assessee is against the confirmation of disallowance of Rs.4,22,992/- by the ld. CIT(A) as made by the AO under section 14A of the Income Tax Act, 1961 read with rule 8D of the Income Tax Rules, 1962 by ignoring the facts that the dividend received by the assessee was only Rs.20,000/-.
3. At the outset, the ld. AR submitted before us that the present case of the assessee stands covered in favour of the assessee by the decision of the Co- ordinate Bench of the Tribunal in assessee’s own case in (AY-2011-12) dated 4.11.2016, wherein the Tribunal held that that the disallowance cannot exceed the amount of exempted income by relying on the decision in the case of Daga Global Chemicals Pvt Ltd V/s ACIT in ITA No.5592/Mum/2012 (AY-2009-10) dated 1.1.2015. The ld. AR prayed before the Bench that the case of the assessee is fully covered by the above said decision of the Tribunal and hence the appeal of the assessee should be allowed. On the contrary, the ld. DR objected to the argument of the ld.AR that the facts as stated at page 3 of the said decision in ITA No.1473/Mum/2015 (supra) was differing and not covered in favour of the assessee.
4. Heard both the parties and perused the material placed before us including the orders of authorities below and case law cited by the ld.AR. The undisputed fact is that during the year the assessee has earned dividend income of Rs.20,000/-, whereas the AO has made disallowance of Rs.4,22,992/-
3 comprising Rs.1,19,657/- under rule 8D(2)(ii) in respect of interest and Rs.3,03,335/- under rule 8d(2)(iii) being 0.50% of the average investment after rejecting the submissions of the assessee which has been incorporated in para 4.2 of the assessment order. The assessee has earned an income of Rs.20,000/- as dividend which is claimed as exempt under section 10(34) of the Act against which the AO disallowed an amount of Rs.4,22,992/-. The appeal preferred by the assessee before the FAA was also dismissed by the ld.CIT(A) by observing and recording his finding at para 5 of the appellate order. We find that the case of the assessee in hand and the case decided by the Co-ordinate Bench of the Tribunal appears in ITA No.1473/Mum/2015 (supra) are materially same and thus the issue raised by the assessee is squarely covered by the above decision. For the sake of convenience we extract relevant findings of the Tribunal as under : “4. I have heard rival contentions and gone through facts and circumstances of the case. Admittedly, the only exempted income earned by assessee on account of dividend is Rs. 20,000/-. I find that this issue is covered in favour of assessee as far as restricting the disallowance to the extent of exempted income only and for this I am placing reliance on the Co-ordinate Bench decision in the case of Daga Global Chemicals Pvt. Ltd. Vs. ACIT dated 01-01-2015 in ITA No.5592/Mum/2012 for the assessment year 2009-10, wherein it has been held in Para 2.2 as under:- “2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is a limited company, engaged in trading of bulk and fine, chemicals, solvent and pharmaceutical raw materials declared its 4 M/s Daga Global Chemicals Pvt. Ltd, . income at Rs.74,40,000/- on 26/09/2009. The assessee credited dividend income of Rs.1,82,262/- in its profit and loss account. The Assessing Officer while framing the assessment invoke section 14A r.w. Rule 8D by contending that assessee claimed various expenses which are related to exempt income in its profit & loss account and disallowed Rs.14,58,412/-. On appeal, before the ld. Commissioner of Income tax (Appeals) broadly the stand taken in the assessment order was affirmed against which the assessee is in 4 further appeal before this Tribunal. The totality of facts clearly indicates, as claimed by the assessee that no borrowed funds were utilized for earning the exempt income by the assessee and further the dividend were directly credited in the bank account of the assessee and no expenditure was claimed. What it may be, we find that the assessee only received Rs.1,82,362/- as dividend income, therefore, there is no question of disallowance of Rs.14,58.412/- by invoking section 14A r.w. Rule 8D under the facts available on record. It was also explained by the ld. counsel for the assessee that on identical fact in earlier years, no disallowance was made. In the present assessment year also, no borrowed funds were invested by the assessee for making investment in shares or for earning dividend income. At best, if any disallowance could be made that can be restricted to Rs. 1,485/- which were claimed as demat charges. Disallowance u/s 14A r. w. Rule 8D cannot exceed the exempt income. In view of this fact, we find merit in the claim of the assessee. The appeal of the assessee is therefore, allowed”. I find that this issue is covered by the Coordinate Bench decision in the case of Daga Global Chemicals Pvt. Ltd. (supra). Respectfully following the same, I direct the AO to restrict the disallowance at Rs.20,000/- and hence, this issue of the assessee’s appeal is partly allowed. My view is fortified by the recent decision of Hon’ble Delhi High Court in the case of Cheminvest Limited v. CIT 378 ITR 33(Delhi).”
Respectfully following the decision of the Co-ordinate Bench of the Tribunal, we set aside the order of the ld. CIT(A) and direct the AO to delete the disallowance of Rs.4,02,992/- out of Rs. 4,22,992/-.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 23.2.2017.