BAMAN KDB MEHTA,MUMBAI vs. DCIT RG 4(1)(1), MUMBAI

The captioned appeal filed by the assessee pertaining to assessment year 2010-11 is directed against an order passed by CIT(A)- 9, Mumbai dated 13/04/2015, which in turn arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 19/2/2013.

1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming action of the Assessing Officer whereby provision of section 14A have been invoked and (Assessment Year : 2010-11) disallowance of Rs. 11,69,282/- has been made as per rule 8D without appreciating that no expenditure directly or indirectly has been incurred for earning exempt income.

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming disallowance under section.14A to the extent of Rs.7,66,897/- out of the interest claimed u/s 57(iii) of Rs.26,74,442/- without appreciating the fact that no part of the loan on which interest paid was utilized in acquiring .investment rather the same has been utilized in giving loan on which interest income is earned. The Ld. CIT (A) further failed to appreciate that there is net interest income, therefore, no disallowance can be made out of interest expenditure.”

3. At the time of hearing, it was noticed that in spite of service of notice of hearing by registered post, none appeared on behalf of the appellant assessee. Accordingly, following Rule 24 of Income-tax (Appellate Tribunal) Rules, 1963, the appeal of the assessee is being disposed of ex-parte qua the appellant, after hearing Ld. Departmental Representative on merit.

4. The appellant is an individual, engaged in the business of trading and broking in debt securities and also investment in shares. The Assessing Officer noted that assessee had earned dividend on shares of Rs.13,73,532/- and long term capital gain on sale of shares of Rs.37,94,211/-, which were exempt incomes, whereas assessee had not disallowed any expenditure under section 14A of the Act as being related to earning of such income. The Assessing Officer made a disallowance of Rs.11,69,282/- under section 14A of the Act by applying the formula contained in Rule 8D (2) of the Income Tax Rules, 1962 (in short ‘the Rules’). The CIT(A) has affirmed the disallowance, against which assessee is in further appeal before the Tribunal.

(Assessment Year : 2010-11) 5. The orders of the authorities below reveal that the disallowance has been made primarily for the reason that assessee was not able to justify as to why no disallowance under section 14A of the Act was made in the return of income. Before me also, there is no material to distract from the findings of the lower authorities, which are hereby affirmed. Thus, the order of the CIT(A) is hereby affirmed and assessee fails in his appeal.