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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO & SHRI AMARJIT SINGH
आदेश / O R D E R
PER AMARJIT SINGH, JM:
This appeal filed by the assessee on 3.3.2014 is against the order of the CIT (A)-4, Mumbai dated 19.12.2013 for the assessment year 2010-2011. In this appeal, assessee raised the following grounds which read as under:-
1. The Ld CIT (A) erred on facts and in law in confirming the order of the AO, making additional disallowance u/s 14A of Rs. 7,35,553/- without appreciating that the appellant had disallowed a sum of Rs. 10,32,886/- which was much higher than the disallowance computed by the AO at Rs. 7,49,333/- and hence, no further disallowance u/s 14A was called for.
Briefly stated relevant facts of the case are that the assessee is engaged in the business of non-banking finance. Assessee filed the return of income declaring the total income of Rs.82,88,894/- under the normal provisions and book profits u/s 115JB of the Act at Rs. 79,12,777/-. Assessment was completed u/s 143(3) of the Act and the assessed income was determined at Rs. 90,24,450/- and Rs. 86,48,330/- u/s 115JB of the Act. In the assessment, AO made disallowance of Rs.7,35,553/- u/s 14A of the Act. On appeal, CIT (A) confirmed the decision of the AO and therefore, the assessee is in appeal before the Tribunal by raising the above mentioned ground.
During the proceedings before us, Ld Counsel for the assessee briefly narrated the facts relating to the said disallowance which include that the assessee earned exempt income of Rs. 42,97,170/-. Under the provisions of section 14A of the Act r.w. Rule 8D of the IT Rules, 1962 (in short ‘the Rules’), assessee suo moto disallowed an amount of Rs.10,32,886/- out of Rs. 18,82,191/- (page 9 of the paper book) towards indirect interest expenses on proportionate basis. This disallowance meets the requirement of provisions of clause (ii) to Rule 8D(2) of the Rules. Regarding the requirement of disallowance u/s clause (iii) to Rule 8D(2), the gross business expenses booked to the P & L Account is only around 44,220/-. Assessee disallowed 30% of the same towards administrative expenses. The sum of Rs. 7,50,000/-, booked under ‘donations’ a/c and the same was excluded from the computation of income. Ignoring the same, the Assessing Officer went formally and invoked the provisions of Rule 8D and quantified the disallowance at Rs. 7,49,333/-. After excluding the suo moto disallowance of Rs. 13,780/- under the said clause (iii) to Rule 8D, AO made addition of Rs. 7,35,553/- (Rs.7,49,333 – Rs. 13,780/-). In these circumstances, assessee filed the present appeal before the Tribunal, highlighting the unfairness of making disallowance of Rs. 7,49,333/- when the gross business expenses itself is only Rs. 44,220/-. In this regard, Ld Counsel for the assessee filed various decisions to demonstrate that the disallowance under clause (iii) to Rule 8D(2) should not exceed to the total debits in the P & L Account.
After hearing both the parties, we have perused the orders of the Revenue Authorities as well as various accounts debited to the P & L Account place on page 9 of the paper book. On perusal of the same, we find the list of accounts in the P & L Account includes filing fees; professional tax; auditors remuneration; bank charges, demat charges; professional fees; depreciation etc. On examining the amounts debited, we find the disallowance of Rs.13,780/- made by the assessee suo moto, is fair and reasonable and it does not call for any interference. Therefore, the addition made by the AO is deleted. Accordingly, the ground raised by the assessee is allowed.
In the result, appeal of the assessee is allowed. Order pronounced in the open court on 11th December, 2015.