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Income Tax Appellate Tribunal, MUMBAI BENCHES “H”, MUMBAI
Before: Shri Joginder Singh, & Shri Ashwani Taneja
Order : आदेश / O R D E R Per Ashwani Taneja (Accountant Member): This appeal has been filed by the Assessee against order of Ld. order of Ld. Commissioner of Income Tax (Appeals)-6 Mumbai, {(in short ‘CIT(A)’}, dated 28.11.2013 passed against assessment order u/s 143(3) 07.03.2013 for A.Y. 2010-11 on the following grounds:
2 Sirdar Carbonic Gas “The learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of Rs. 8,19,151/- made u/s. 14A of the Income-tax Act 1961 by the Assessing Officer out of expenses as expenditure attributable to the earning of exempt income. Your appellants submit that they have already disallowed a sum of Rs.1,11,814/- in their return of income u/s.14A as expenditure incurred towards earning income not chargeable to tax. The disallowance of Rs.8,19,151/- is an additional disallowance. Your appellants submit that no further disallowance is called for. Your appellants submits that the disallowance of Rs. 8,19,151/- ought to be deleted. Without prejudice to the above your appellants submit that the disallowance of Rs.8,19,151/- u/s. 14A read with Rule 8D is excessive and ought to be reduced substantially.”
During the course of hearing, arguments were made by Ms. Neha Paranjpe, Authorised Representative (AR) on behalf of the assessee and by Shri Abhishek Sharma, Departmental Representative (DR) on behalf of the Revenue.
The solitary ground raised in this appeal is with regard to disallowance u/s 14A. We have considered the submissions made by the both the sides before deciding the issue.
3.1. It is noted by us that the assessee had made suo motu disallowance of Rs.1,11,814/- however, the AO made further disallowance u/s 14A for Rs.4,33,019/- on account of indirect interest and Rs.8,19,151/- on account of indirect expenses computed @ 0.5 % of the average value of investment. With the assistance of the parties, it noted by us that own funds of the assessee are in excess of the amount of investment in tax-free
3 Sirdar Carbonic Gas securities and therefore, no disallowance of interest is called for and therefore, same is directed to deleted.
3.1. With regard to the disallowance on account of indirect expenses, Ld. Counsel submitted before us details showing that substantial amount of investment was on account of strategic reasons. The investments were made in various companies as strategic investment. In addition to that there are certain investments on which no tax-free income is earned. It is noted by us on the basis of detailed submissions by the Ld. Counsel that if these kinds of investment are excluded, then the disallowance comes to Rs.351720/- only on account of indirect expenses.
3.2. During the course of hearing Ld. DR did not point anything incorrect or wrong in the details submitted by the Ld. Counsel and he fairly agreed that disallowance on account of indirect expenses can be restricted to a sum of Rs.351720/-.
3.3. We have gone through the facts of the case and settled legal position in this regard. In our view, arguments of the assessee have substance and thus total disallowance should be restricted to Rs.351720/- (including the suo motu disallowance made by the assessee of Rs.111814/-). Therefore, we sustain disallowance u/s 14A to the extent of Rs.351720 and balance disallowance is directed to be deleted. The assessee gets part relief accordingly.
4 Sirdar Carbonic Gas 4. In the result, the appeal filed by the Assessee is treated as partly allowed. Order pronounced in the open court on 9th September, 2016.