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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI C.N. PRASAD & SHRI RAJESH KUMAR
आयकर अपील�य अ�धकरण, मुंबई �यायपीठ , मुंबई । IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER आयकर अपील सं/ (�नधा�रण वष� / Assessment Year: 2008-09 बनाम/ M/s. Sylvex Cable Co. Pvt. The Dy. CIT, Central Circle-37 Ltd., Mumbai Vs. 11, Happy Home, 244, Waterfield Road, Bandra (W), Mumbai-400 050 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. AAACS 6085L (अपीलाथ� /Appellant) (��यथ� / Respondent) .. अपीलाथ� ओर से/ Appellant by: None ��यथ� क� ओर से/Respondent by: Shri R.A. Dhyani सुनवाई क� तार�ख / Date of Hearing :02 .02.2016 घोषणा क� तार�ख /Date of Pronouncement :24.02.2016 आदेश / O R D E R PER C.N. PRASAD, JM:
This appeal is filed by the assessee against the order of the Ld. CIT(A)-41, Mumbai dated 10.10.2011 pertaining to assessment year 2008-09.
None appeared on behalf of the assessee inspite of notice by RPAD. Therefore we heard the Ld. Departmental Representative and dispose of this matter ex parte on merit.
The Ld. Departmental Representative submits that the AO while completing the assessment noticed that the assessee received dividend income and therefore disallowed Rs. 39,63,654/- as expenditure attributable for earning such income by invoking the provisions of Sec. 14A of the Act.
On appeal, the Ld. CIT(A) sustained the disallowance observing that the AO computed the disallowance u/s. 14A r.w. Rule 8D(2)(iii) being 0.5% of the average value of investment shown in the balance sheet and therefore the action of the AO is correct.
We find from the assessment order that the assessee in the course of assessment proceedings submitted working of disallowance of expenditure u/s. 14A of the Act and such working was made considering only those investments which would yield dividend. But the AO has taken 0.5% of average value of total investments appearing in balance sheet.
5.1. The assessee before the Ld. CIT(A) submitted that the AO erred in applying Sec. 14A and making disallowance of interest and other expenses of Rs. 39,63,654/-. It was further contended that in any event, the AO is not justified in disallowing expenses to the tune of Rs. 39,63,654/- when the assessee has received dividend income of Rs. 21,57,188/- only. However, the Ld. CIT(A) sustained the order of the Ld. CIT(A). He has not dealt with the submissions of the assessee that the disallowance should be restricted to the extent of dividend income only.
We find force in the submissions of the assessee that only those investments which would yield dividend and which is exempt should be considered for disallowance under Rule 8D(2)(iii). We also hold that the disallowance under section 14A should not exceed the dividend income earned by the assessee. We direct the AO to re- compute the disallowance taking only those investments which yield dividend income and apply Rule 8D(2)(iii) and such disallowance should not exceed the dividend income earned by the assessee.
In the result, the appeal filed by the assessee is treated as allowed for statistical purpose. Order pronounced in the open court on 24th February, 2016.