ITO, WD-36 (2), KOLKATA, KOLKATA vs. M/S SRI RAM COMMERCIAL CO., KOLKATA

The assessee in the present case is a partnership firm, which is engaged in the business of finance and bill discounting. The return of income for the year under consideration was filed by it on 29.09.2009 declaring a loss of Rs.1,70,18,460/-. In the said return, the dividend income of Rs.24,00,714/- received during the year under consideration was claimed to be exempt by the assessee and a disallowance of Rs.38,63,595/- was offered by it under section 14A on account of ./2014 Assessment Year: 2009-2010 Page 2 of 5 expenses incurred in relation to the earning of exempt dividend income. The disallowance so offered was worked out by the assessee by applying Rule 8D as under:- “(1) Average investment earning exempt dividend As on 31.03.2008 76983242 As on 31.03.2009 65430874 Average Investments 71207058 (2) Total Assets As on 31.03.2008 135922979 As on 31.03.2009 99903273 Average total assets 117913126 (3) Total interest as per P&L 11787974 Account 3716390 Less: Interest paid to partners @ 7% allowable u/s 40(b) (already considered by AO in his order) 8071584 Less: Set off of interest earned 2819173 5252411 On Bank F.D. credited to P&L A/c. (4) Max.: Disallowable 5252411 x 3171901 interest u/r 8D(2)(ii) 71207058/ 117913176 (5) Disallowance u/r 8D(2)(ii) 0.5% of average 433648 investments Limited to actual claim of total expenses In P&L a/c. minus STT & provision for Gratuity Already added back by the assessee in its computation

Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee disputing the additional disallowance made by the Assessing Officer under section 14A read with Rule 8D and since the calculation made by the assessee of the disallowance under section 14A by applying Rule 8D was found to be correct by the ld. CIT(Appeals), he restricted the disallowance of Rs.66,09,520/- made by the Assessing Officer under section 14A to Rs.38,63,595/-. Aggrieved by this relief given by the ld. CIT(Appeals) to the assessee, the Revenue has preferred this appeal before the Tribunal.

At the time of hearing before us, none has appeared on behalf of the assessee. This appeal of the Revenue is, therefore, being disposed of ex parte qua the respondent-assessee after hearing the argument of the ld. D.R. and perusing the relevant material on record. It is observed that while computing the disallowance under section 14A by applying Rule 8D, average investment earning exempt dividend income was taken into consideration by the assessee while the Assessing Officer had taken the average total investment made by the assessee in the shares. This issue already stands covered in favour of the assessee by the decision of the Coordinate Bench of this Tribunal in the case of REI Agro Limited, Kolkata –vs.- DCIT in which has already been affirmed by the Hon’ble Calcutta High Court. Similarly net interest expenditure was rightly considered by the assessee while computing the disallowance ./2014 Assessment Year: 2009-2010 Page 5 of 5 under section 14A by applying Rule 8D as against the gross interest wrongly taken into account by the Assessing Officer while computing the disallowance. The disallowance under section 14A worked out by the assessee at Rs.38,63,595/- thus was in accordance with Rule 8D as rightly held by the ld. CIT(Appeals) and even the ld. D.R. has not been able to rebut or controvert this position. We, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) restricting the disallowance of Rs.66,09,520/- made by the Assessing Officer under section 14A to Rs.38,63,595/- and upholding his impugned order on this issue, we dismiss this appeal filed by the Revenue.

In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on December 02, 2016.