SHRI SAGARMAL MALL,KOLKATA vs. ACIT, CIRCLE - 32, KOLKATA, KOLKATA

Ground No. 1 raised by the assessee in this appeal is general in nature, which does not call for any specific adjudication.

The issue involved in Ground No. 2 relates to the disallowance made by the Assessing Officer under section 40(a)(ia), which is sustained by the ld. CIT(Appeals) to the extent of Rs.9,181/-. ./2011 Assessment year: 2008-2009 Page 2 of 5

The assessee in the present case is an individual, who is engaged in the business of trading and investment. The return of income for the year under consideration was filed by him on 30.09.2008 declaring total income of Rs.91,82,760/-. During the course of assessment proceedings, the Assessing Officer found that the tax deducted at source amounting to Rs.9,181/- from commission payment was not deposited by the assessee into the Government Account within the prescribed time limit. He, therefore, made a disallowance of Rs.9,181/- under section 40(a)(ia). On appeal, the ld. CIT(Appeals) confirmed the said disallowance.

We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. The ld. counsel for the assessee has invited our attention to the copy of the relevant challan placed at page no. 15 of the paper book to show that the amount of TDS in question was deposited by the assessee on 27.09.2008, i.e. before the due date of filing of return of income for the year under consideration under section 194C and, therefore, there is no case of making disallowance under section 40(a)(ia) as per the relevant amendment made in the said provisions, which is held to be applicable retrospectively. The ld. D.R. has submitted that this stand taken by the assesese for the first time before the Tribunal requires verification by the Assessing Officer and since the ld. counsel for the assessee has no objection in this regard, we restore this issue to the file of the Assessing Officer to decide the same afresh after verifying the new stand taken by the assessee for the first time before the Tribunal. Ground No. 2 is accordingly treated as allowed for statistical purposes.

The common issue involved in Grounds No. 3 & 4 relates to the disallowance made by the Assessing Officer and confirmed by the ld. ./2011 Assessment year: 2008-2009 Page 3 of 5 CIT(Appeals) under section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962.

During the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee has made substantial investment in shares and has also earned dividend income thereon, which is exempt from tax. He also found that there were certain direct expenses incurred by the assessee in relation to the earning of the exempt dividend income and there were also some indirect expenses incurred by the assessee, which were partly attributable to the earning of the said income. He also noted that the investment in shares was partly made by the assessee out of interest bearing borrowed funds. He, therefore, worked out the expenses attributable to the earning of exempt dividend income by applying Rule 8D at Rs.89,51,423/- and made a disallowance to that extent under section 14A. The assessee found certain mistakes in the disallowance so worked out by the Assessing Officer and while disposing of the application filed by the assessee under section 154, the disallowance under section 14A was recomputed by the Assessing Officer at Rs.64,10,457/-. On appeal, the ld. CIT(Appals) confirmed the disallowance made by the Assessing Officer under section 14A read with Rule 8D.

We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. The ld. counsel for the assessee has not raised any contention to dispute the applicability of section 14A as well as Rule 8D in the case of the assessee. He, however, has relied, inter alia, on the decision of the Coordinate Bench of this Tribunal rendered in the case of REI Agro Limited –vs.- DCIT vide its order dated 19.06.2013 passed in & 1423/KOL/2011, wherein it was held that not all investments become the subject matter of consideration while computing disallowance under section 14A read with ./2011 Assessment year: 2008-2009 Page 4 of 5 Rule 8D. It was held that the disallowance under section 14A read with Rule 8D has to be in relation to the income, which does not form part of the total income and this can be done only by taking into consideration the investment, which has given rise to this income, which does not form part of the total income. The ld. counsel for the assessee has also relied on the decision of the Chennai Bench of ITAT in the case of Sundaram Asset Management Co. Limited –vs.- DCIT rendered vide its order dated 19.07.2013 passed in ITA No. 1774/Mad./2012, wherein it was held that the provisions of Rule 8D would not apply to short-term investments made by the assessee on which capital gain tax is payable on sale. The Assessing Officer accordingly was directed by the Tribunal to re-compute the disallowance under section 14A read with Rule 8D after excluding short-term investments.

Keeping in view the decisions of the Coordinate Benches of this Tribunal in the case of REI Agro Limited (supra) and Sundaram Asset Management Co. Limited (supra), we restore this matter to the file of the Assessing Officer for the limited purpose of re-computing the disallowance under section 14A by applying Rule 8D by excluding the investment on which no exempt income was actually received by the assessee during the year under consideration as well as the short-term investment on which capital gain tax was paid by the assessee on sale during the year under consideration. Grounds No. 3 & 4 of the assessee’s appeal are accordingly treated as partly allowed.

In the result, the appeal of the assessee is treated as partly allowed.