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This appeal by the Assessee is against order dt: 30-09-2014 passed by the Commissioner of Income Tax-(Appeals), Central-III, Kolkata for the assessment year 2009-10.
At the outset, the ld.AR of the assessee submits that there was a mistake crept in the grounds of appeal filed along with Form No.36 and to rectify the same sought permission to file the revised grounds of appeal. With the permission, accordingly, the ld.AR of the assessee filed revised grounds of appeal and the same was taken for adjudication. Therefore, the only question is to be decided as to whether the CIT-A erred in confirming the addition made on account Sec. 14A r.w.r 8D of the IT Rules in the facts and circumstances of the case. The ld.AR also submits that the AO made disallowance under Rule 8D(2)(iii) of Rs.5,94,783/- @0.5% basing on the average value of investment from the balance sheet on first day and last day of previous year. The ld. AR of the assessee further submits that the CIT-A without considering the decision of Kolkata Tribunal in the case of REI Agro confirmed the order of the AO in making addition.
Before us the ld.AR submits that the assessee has earned only Rs.218/- as dividend from certain investments. The ld. AR argued that the only investment, which has given rise to the exempt income should be taken into consideration and application of Rule 8D(2)(iii) of the I T Rules is bad under law and placed reliance on the order of Kolkata Tribunal in the case of REI Agro reported in 144 ITD 141(Kol). On the other hand, the ld. DR has relied on the orders of the AO and the CIT-A.
Heard rival submissions and perused the material available on record. We find that except observing that the assessee has earned dividend income and nothing was shown by the AO in his order that the assessee earned income as dividend income and resorted to apply the method as provided under rule 8D(2)(iii) and computed the expenses basing on total average investment as opening and closing balance respectively and disallowed the impugned amount. The contention of the assessee before the CIT-A as well as before us, was that the assessee derived dividend income of Rs.218/- from certain investments and such investments were made out of its own funds. In this regard we may refer to the said decision as relied by the Ld.AR in the case of supra, wherein the Tribunal held that the dividend earned out of investments would become the subject matter to be considered for computing the expenses by the method as provided under Rule 8D when such investment yields dividend income. For better understanding relevant portion of which is reproduced herein below:-
8.1 Thus, not all investments become the subject-matter of consideration when computing disallowance under section 14A read with rule 8D. The disallowance under section 14A read with rule 8D is to be in relation to the income which does not form part of the total income and this can be done only by taking into consideration the investment which has given rise to this income which does not form part of the total income. Under the circumstances, the computation of the disallowance under section 14A read with rule 8d(2)(ii), which is issue in the assessee’s appeal, is restored to the file of the AO for recomputation in line with the direction given above. No disallowance under section 14A read with rule 8D(2)(i) and (ii) can be made in this case.”
Respectfully following the co-ordinate Bench decision of this Tribunal supra, we direct the ld. AO to consider disallowance in terms of Rule 8D(2)(iii) of the I.T Rules by considering only those investments, which had yielded dividend income. In view of our discussion, the revised ground as raised by the assessee is allowed for statistical purpose.
In the result, the appeal filed by the assessee is allowed for statistical purpose.
Order pronounced in the open Court on 24-03-2017