MAZDA IMAGING P.LTD,MUMBAI vs. ASST CIT CIR 6(3), MUMBAI

The present appeal is filed by the assessee against the order of CIT(A)-12, Mumbai dated 08.8.2013 for the A.Y. 2009-10. The assessee has only issue in respect of disallowance made u/s. 14A r/w Rule 8D of Income Tax Rules, 1962.

The brief facts of the case are that the assessee filed return of income declaring the total income of Rs.1,73,17,400/-. The return of income was selected for scrutiny. During the course of assessment proceedings the A.O. observed that the assessee 2 Mazda Imaging Pvt. Ltd. vs. Asst. CIT claimed exempt income of Rs.6,34,252/-. The assessee was asked to explain the detail of expenditure incurred for earning exempt income and also show cause as to why the disallowance u/s. 14A r/w Rule 8D be not made on its case. The assessee replied that no expenses were incurred for the purpose of earning exempt income and, hence, no disallowance u/s. 14A is called for. The reply submitted by the assessee was not accepted by the A.O. and, thus, the A.O. calculated the disallowance u/s. 14A r/w Rule 8D at Rs.7,14,533/- attributable to the dividend income in the assessment order.

Aggrieved by the assessment order, the assessee filed the appeal before the CIT(A). The ld. CIT(A) after considering the submissions of the assessee directed the A.O. to rework out the average value of the total assets for the purpose of computation of interest component in accordance with clause (2) of Rule 8D, in the impugned order against which the present appeal is filed by the assessee before us.

We have heard the ld. AR for the assessee and the ld. DR for the Revenue and perused the material on record. The ld. AR of the assessee argued that the assessee has not made any voluntary disallowance in the return of income as no expenses was incurred for earning the exempt income. The assessee was having sufficient fund for making investment for earning the exempt income. The assessee further argued that as on 31.3.2008 the assessee had made investment of Rs.2.85 crore the assessee has owned fund of Rs.5.90 crores, and as on 31.3.2009 the assessee had funds of Rs.7.09 crores against which investment was of Rs.2.59 crore . Thus the assessee was having sufficient own funds for making the investment for earning the exempt income. Accordingly no disallowance on account of interest is warrant.

We have considered the rival contentions and perused the material on record. We found that the assessee was having sufficient fund in his account. The assessee had not borrowed any money for making investment for earning the exempt income.