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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SRI MAHAVIR SINGH, JM AND SRI RAMIT KOCHAR, AM (A.Y:2008-09) Shri Ameet S. Gandhi, Flat No.10, Vs. The Astt. Commissioner of 4th Floor, Gandhi House, Palmera, Income Tax- 11, Altamoount Road, Mumbai -26 Mumbai 400 020. PAN:ACRP0766E Appellant .. Respondent Appellant by .. Shri Bharat Gandhi, AR Respondent by .. Shri A. Ramachandran, DR Date of hearing .. 18-10-2016 .. Date of pronouncement 18- 10- 2016 O R D E R PER MAHAVIR SINGH, JM:
This appeal by the assessee is arising out of the order of the CIT (A)-3, Mumbai in appeal No.CIT (A)-3/ACIT-11(2)/IT-247/2010-11 dated 31-10-2011. Assessment was framed by the DCIT, Circle-11, Mumbai for the assessment year 2008-09 vide his order dated 10-12-2010 u/s 143(3) of the Income Tax Act, 1961 (hereinafter „the Act‟).
The first issue in this appeal of the assessee is against the order of the CIT (A) confirming the disallowance of expenses relatable to exempted income by invoking the provisions of Section 14A of the Act read with 8D of the Income Tax Rules, 1962 (hereinafter “the Rules”).
At the outset, the learned Counsel for the assessee stated that the assessee has earned dividend income to the extent of Rs.77,784/- and disallowance made by the AO by invoking the provisions of Section 14A of the Act read with Rule 8D of the Rules to the extent of Rs.1,51,558/- which is more than the exempted income. The learned Counsel for the assessee only requested for restricting the disallowance to the extent of exempted income and for this he relied on the Co- ordinate Bench decision in the case of Daga Global Chemicals Pvt. Ltd. Vs.
ACIT dated 01-01-2015 in 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 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”. Accordingly, he requested the Bench to restrict the disallowance to the exempt income only i. e. to the extent of Rs.77,784/-.
4. After hearing both the sides and going through the facts and circumstances of the case, we find that the assessee has received dividend income of Rs.77,784/- which is claimed as exempt. We 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, we restrict the disallowance at Rs.77,784/- and hence, this issue of the assessee‟s appeal is partly allowed.Our 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).
The next issue of this appeal of the assessee is against the order of the CIT (A) confirming the disallowance out of expenses at Rs.54,480/- out of the total expenses at Rs.2,72,401/- on account of motor car, insurance on car , motor car expense and telephone expenses telephone expenses.
We have heard the rival contentions on this issue and gone through the facts and circumstances of the case. We find that the total expenses on account of depreciation on motor car, insurance on car, motor car expense and telephone expenses telephone expenses was claimed by the assessee in aggregate at Rs.2,72,480/-. The AO disallowed 1/5th of the same at Rs.54,480/- and the CIT (A) confirmed the same on ad hoc basis. We find that the disallowance in aggregate from all the expenses at 1/5th is higher and hence, we restrict the disallowance at 1/10th of the total expenses. We direct the AO accordingly. This issue of the assessee‟s appeal is partly allowed.
In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 18-10-2016.
Sd/ Sd/ (RAMIT KOCHAR) (MAHAVIR SINGH) ACCONTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 18-10-2016 Lakshmikanta Deka/Sr.PS
Copy of the Order forwarded to: