DCIT 2(1), MUMBAI vs. ARCHWAY INVESTMENT CO. LTD, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद� राजे� के अनुसार PER RAJENDRA, AM- Challenging the order of the CIT (A)-4,Mumbai, dated 11/12/2013,the Assessing officer (AO) has filed the present appeal.The effective ground of appeal is about disallowance to be made u/s.14A of the Act. Brief-background: 2.Assessee-company,engaged in the business of investment in shares and stock,filed its return of income on 18/11/2006,declaring loss of Rs. 14.85 lakhs.The AO completed the assessment u/s. 143(3) of the Act,on 30/12/2008,determining its income at Rs. 22.67 lakhs. The matter travelled up to the Tribunal. Vide its order,dated 17/03/2011,it restored the matter back to the file of the AO for re-computing the disallowance under section 14A in the light of law laid down by the Hon’ble jurisdictional High Court in the case of Godrej and Boyce Manufacturing Company Ltd. The assessee appeared before the AO and made submissions requesting him to restrict the disallowance up to 1%/2% of the exempt income.However,the AO in his one-line order stated that submission made by the assessee were not satisfactory and hence could not be accepted.He made an addition of Rs. 30.32 lakhs to the income of the assessee vide his order dated 26/12/ 2012. 3.Aggreived by the order of the AO,the assessee preferred an appeal before the first appellate authority(FAA).Before him,it made the same argument that were part of the submissions made before the AO. It was contended that the company had utilised its own funds/interest free funds for making investment, that question of disallowance of direct/indirect expenses did not arise, it had not made any new investment during the year under consideration, that it had earned average interest at the rate of 8.87% on lending and had paid less interest on borrowings, that the interest expenditure had no direct/indirect nexus with the exempt income, that the AO did not follow the specific direction of the Tribunal.

1418/M/14-Archway