DSP HMK HOLSDING P.LTD,MUMBAI vs. DCIT CIR 2(1), MUMBAI

The only issue raised in these two appeals relates to the disallowance u/s 14A read with Rule 8D of the Act. In connection with this issue, Ld Counsel for the assessee submitted that the disallowance made by the AO has far exceeded the total claim of expenditure in the P & L Account. Bringing our attention to the order of the Tribunal in assessee’s own case for the AY 2008-2009 in ITA No. 7598/M/2011, dated 22.1.2014, copy of which is placed on record, and submitted that the Tribunal granted relief allowing the arguments of the assessee as discussed in para 5 of the said order of the Tribunal (supra). He further submitted that various decisions are now in force on the issue of whether the AO is allowed to disallow the expenditure, which is debited to the P & L Account. Further, he fairly mentioned that this issue may be remanded to the file of the AO for considering the ratio laid down in the said assessee’s own case (supra) for the AY 2008-2009 and other judgments, if any, on the subject.

After hearing both the parties, we find the said para 5 of the Tribunal’s order in assessee’s own case for the AY 2008-2009 (supra) is relevant in this regard. Considering the significance of the said para 5 of the Tribunal’s order (supra), the same is extracted as under:- “5. We are of the considered view that a reasonable allocation of expenditure has to be made which can be attributed to the income which is chargeable to tax particularly bank interest income of Rs. 28.50 Crs as against dividend income of Rs.

46 Crs (approximately). Considering the facts and circumstances of the case, we are of the considered view that expenditure of Rs. 7,21,927/- as worked out by assessee, the details of which are mentioned by AO at page 2 of the assessment order, is reasonable to make disallowance u/s 14A read with Rule 8D. Accordingly, we restrict the disallowance to Rs. 7,21,927/- by reversing the orders of authorities below and allow the grounds of appeal taken by assessee. Hence, the grounds of appeal taken by assessee are allowed.”

On perusal of the above decision of the Tribunal, we agree with the Ld Counsel’s argument and remand the matter to the file of the AO. We direct the AO to apply the said ratio to the facts of the present case and other decisions, if any, in force and decided the issue in accordance with law. AO shall grant a reasonable opportunity of being heard to the assessee as per the set principles of natural justice. Accordingly, all the grounds raised in both the cross appeals are allowed for statistical purposes.

In the result, both the cross appeals are allowed for statistical purposes.