ACIT 3(1)(1), MUMBAI vs. B. ARUNKUMAR CAPITAL & CREDIT SERVICES P.LTD, MUMBAI

The captioned appeal filed by the Revenue pertaining to assessment year 2010-11 is directed against an order passed by CIT(A)-8, Mumbai dated 16/03/2016, which in turn, arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 11/03/2013.

2. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing the appeal of the assessee to consider the revised computation of expenses disallowable u/s.14A filed through letter during the assessment proceedings without appreciating the fact that the AO has rejected the same as the assessee has failed to file the revised return within the time allowable as per the IT Act, relying on the decision of the Hon'ble apex court in the case of M/s Goetze India Ltd (284 ITR 323).

3. "The appellant prays that the order of CIT (A) on the above ground be set aside and that of Assessing Officer be restored."

3. In brief, the relevant facts are that the respondent assessee is engaged in the business of share trading and investments. During the year under consideration, it had earned dividend income of Rs.10,25,288/- on equity shares/mutual funds. In the return of income field, assessee had suo-moto disallowed a sum of Rs.51,72,453/- under section 14A of the Act. Such disallowance was worked out in terms of Rule 8D(2)(ii)of the Income Tax Rules, 1962 ( in short ‘the Rules’) at Rs.47,64,700/- and under rule 8D(2)(iii) at Rs.4,07,752/-totaling to Rs.51,72,453/-. However, in the course of assessment proceedings assessee claimed that the disallowance worked out in terms of Rule 8D(2)(ii) of the Rules was also not merited. The Assessing Officer did not accept the fresh claim made by the assessee as according to him, a fresh claim can only be made by filing a revised return of income. Accordingly, the Assessing Officer worked out the disallowance under section 14A of the Act by applying Rule 8D of the Rules at Rs.90,78,947/- as against Rs.51,72,453/- made by the assessee in the computation of income. The Assessing Officer worked out the disallowance under Rule 8D(2)(ii) of the Rules at Rs.83,63,274/- and under Rule 8D(2)(iii) of the Rules at Rs.7,15,673/-.

4. When the assessee carried the matter in appeal before CIT(A), the CIT(A) accepted the fresh plea of the assessee and deleted the entire disallowance of Rs.83,63,274/- made in pursuance to Rule 8D(2)(ii) of the Rules in relation to the interest expenditure and for the disallowance as per Rule 8D(2)(iii) it was reduced to Rs.4,07,752/- the suo-moto disallowance made by the assessee against, a sum of Rs.7,15,673/- worked out by the Assessing Officer. Against such an action of the CIT(A) Revenue is in appeal before the Tribunal.

6. Though, the Ld. Departmental Representative has relied upon the order of the Assessing Officer in support of the Revenue, but no credible material argument has been put-forth as to how the decision of the CIT(A) is wrong, whereby the disallowance as per Rule 8D(2)(ii) of the Rules has been deleted following the ratio of the judgment of the Hon'ble Bombay High Court in the cases of Reliance Utilities & Power Ltd. (supra) and HDFC Bank Ltd.(supra). In the absence of any justifiable reason I find no reason to interfere with the conclusion of the CIT(A), which I hereby affirm. Even the reliance placed by the CIT(A) on the ratio of the judgment of the Hon'ble Bombay High Court in the case of Pruthvi Brokers & Shareholders Pvt. Ltd.(supra) to admit the fresh claim of the assessee is quite justified having regard to facts and circumstances of the case. It is quite clear that the fresh claim made by the assessee in relation to the computation of disallowance as per Rule 8D(2)(ii) of the Rules was a point requiring application of law for which the relevant facts are available on record. Therefore, CIT(A) made no mistake in admitting such fresh claim and allowing relief to the assessee. Under these circumstances, I hereby affirm the order of the CIT(A) and Revenue fails in its appeal.