ANIL LAXMICHAND SHAH,MUMBAI vs. JCIT CIR 24(1), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखाकार सद�य राजे�� केकेकेके अनुसार अनुसार PER Rajendra,A.M.- लेखाकार सद�य राजे�� लेखाकार सद�य राजे�� लेखाकार सद�य राजे�� अनुसार अनुसार Challenging the order,dtd.17.04.2013,of CIT(A)-34,Mumbai,the assessee has filed the present appeal.Assessee,an individual,deriving income from salary and share trading,filed his return of income on 31.07.2008,declaring income of Rs.1,64,41,831/-.The assessing officer(AO) completed the assessment on 30. 09.2011,u/s.143(3)of the Act,determining the income of the assessee at Rs.1.79 Crores. 2.Effective ground of appeal

is about disallowing a sum of Rs.2.42 lakhs u/s.14A of the Act. During the assessment proceedings, the AO found that assessee had received tax-free dividend income of Rs. 1.20 crores and interest income of Rs. 1.01 lakhs. He asked the assessee to furnish note on applicability of the provisions of section 14. A read with rule 8D of the income tax rules, 1962. In response to the show cause notice the assessee stated that he had not incurred an expenditure for earning tax free income, that question of disallowance under section 14. A would not arise at all. After considering the submission of the assessee the AO held that assessee had incurred expenditure of Rs. 1.72 lakhs towards portfolio management fees, that he has not claimed the said expenditure, that he has earned exempt income of Rs. 1.21 crores. He made a disallowance of Rs. 14, 93, 971/-, invoking the provisions of section 14. Ar.w.Rule 8D. 3.Aggrieved by the order of the AO, the assessee preferred an appeal before the first appellate authority (FAA).Before him it was argued that the AO had wrongly applied the formula laid down under rule 8D without appreciating the facts, assessee had not claimed the expenditure of Rs. 1.72 lakhs under the head portfolio management fees, that during the year under consideration he had not availed the services of portfolio management scheme, that he had not incurred an expenditure in connection with earning of exempt income, that the expenses of demat charges bank charges and the professional fees had been directly debited to his capital account, that he had not claimed any expenditure and that therefore no disallowance could be made under section 14. A of the Act.After considering the submission of the assessee and the assessment order, that the FAA referred to the case of Godrej and Boyce Ltd. (328 ITR 81) and held that a reasonable disallowance could be made by the AO under section 14. A of the act. He restricted the disallowance to 2% of the total exempt income i.e. to Rs. 2.42 lakhs.

…2/-