RAJENDRA D. SHAH,MUMBAI vs. ACIT 21(1), MUMBAI

O R D E R

PER RAJESH KUMAR, AM:

2. CIT (A) erred in confirming application of Rule 8D(2)(ii) of section 14A without considering the fact that net worth of appellant is more than investments and no new investment made by appellant during the year by borrowing.

3. CIT (A) erred in confirming application of Rule 8D(2)(iii) being 0.5% of average investment by ignoring fact that all investments are in group companies for maintaining control of group and investment was out of own net worth and appellant need not incur any administrative to earn exempt income.” The brief facts of the assessee are that the assessee filed his return of 2. income on 22.09.2010 showing an income of Rs. 81,94,096/-. The case of the assessee was fixed for scrutiny and statutory notices u/s 143(2) and 142(1) were issued and served upon the assessee. Thereafter, the assessment was completed by the AO after considering the replies and submissions of the assessee filed from time to time in response the various queries during the course of assessment proceedings vide order dated 25.03.2013 passed u/s 143(3) of the Act at Rs. 86,51,197/- by making various additions including disallowance of Rs.4,57,101/- made u/s 14A of the Act which is the subject matter of present appeal before us. The AO made the disallowance on the ground that the assessee earned dividend of Rs. 3,750/- and failed to made disallowance u/s 14A whereas the provisions of section 14A rule 8D were clearly applicable.

3. The aggrieved assessee, preferred an appeal before the CIT(A), who also dismissed the appeal by upholding the additions as made by the AO u/s 14A rule 8D after considering the submissions of the assessee which have been incorporated in para 3.3 of the appeal order and now the assessee is before us challenging the order of CIT(A).

4. We have considered the rival submissions and perused the relevant records placed before us. We note that the disallowance confirmed by the CIT(A) comprises of prorata interest of Rs. 1,31,747/- under rule 8D(2)(ii) and indirect expenses @0.5% of average investments Rs. 3,25,353/- under rule 8D(2)(iii). The common issue raised in all the grounds of appeal is with respect to confirmation of disallowance under Rule 8D of IT Rules, 1962. On the first limb under rule 8D(2)(ii) , the ld counsel for the assessee submitted before us that the case of the assessee is fully covered in his favour by the decision of the jurisdictional High Court in the case of HDFC Bank Ltd (366 ITR 505) (Bom) as the own funds of the assessee were for more than the investments in shares and securities and accordingly prayed for the deletion of the same. As regards the second limb of rule 8D the ld AR submitted before us that the 99.78% of the investments were in group companies and dividend or profit was not the motive but strategically held by the assessee in those concerns and therefore no disallowance was called for. In support to his arguments the ld counsel relied on the decision of the Mumbai Tribunal in the case of Garware Wall Ropes Ltd V Add. CIT(2014) 46 taxmann.com18 (Mumbai-Trib).

5. The ld DR per contra relied on the orders of authorities below.