SHAILA J PARIKH,MUMBAI vs. ASST CIT CIR 12(3), MUMBAI

The only issue urged in this appeal is with regard to disallowance of ` 12.33 lakhs made by the Assessing Officer under rule 8D(2)(iii) of the I.T. Rules.

We have heard the parties and perused the record. The assessee had earned following exempted income during the year under consideration:-

At the time of hearing, the assessee took us to the copies of the income and expenditure account and also the statement of total income. Learned AR submitted that though the assessee has shown expenses of ` 39.52 lakhs in income and expenditure account, the same has not been claimed as deduction while computing total income. She submitted that the expenses incurred by the assessee included PMS charges of ` 10.56 lakhs. Hence the same should be deemed to have been disallowed u/s. 14A of the Act. Accordingly, learned AR submitted that no further disallowance is required to be made since the assessee did not claim any expenditure while computing total income.

On the contrary, learned Departmental Representative placed reliance on the order passed by learned CIT(A).

Having heard the rival submissions, we are of the view that there is merit in the contentions of the assessee. The assessee has not claimed any expenditure while computing total income. Further, the expenses shown in the income and expenses account has not been claimed as deduction while computing total income. The above said expenses include PMS charges of ` 10.56 lakhs which was not claimed the assessee, meaning thereby the same shall constitute disallowance u/s. 14A of the Act. Under these set of facts, we are of the view that no disallowance u/s. 14A is called for. Accordingly, we set aside the order passed by learned CIT(A) on this issue and direct the Assessing Officer to delete this disallowance.

In the result, appeal filed by the assessee is allowed.