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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI N.K. BILLAIYA & SHRI PAWAN SINGH
O R D E R
PER N.K. BILLAIYA, AM:
This appeal by the assessee is preferred against the order of the Ld. CIT(A)-16, Mumbai dated 18.02.2013 pertaining to Assessment year 2008-09.
The sum and substance of the grievance of the assessee is that the Ld. CIT(A) erred in confirming the addition of Rs. 10,64,993/- made u/s. 14A r.w. Rule 8D of the Act.
The assessee is an exporter of combs/brushes located in SEZ. While scrutinizing the return of income, the Assessing Officer noticed that the assessee has shown dividend income of Rs. 61,26,105/- which is claimed to be exempt. The AO further noticed that the assessee has not disallowed any expenditure relating to earning of exempt income. The assessee was asked to explain its stand.
3.1. Vide letter dated 1.12.2010, the assessee explained that he is maintaining separate books of account for business and for personal assets and liabilities. It was further explained that the expenditures incurred for earning dividend income has not been debited to Profit & Loss account of the business. The same were claimed in the personal accounts of the assessee and therefore no disallowance is to be made u/s. 14A of the Act.
3.2. This submission of the assessee did not find any favour with the AO who proceeded by computing the disallowance u/s. 14A r.w. Rule 8D and the same was computed at Rs. 10,64,993/-.
The assessee carried the matter before the Ld. CIT(A) but without any success.
Before us, the Ld. Counsel for the assessee drew our attention to the statement of accounts filed in the Paper Book to substantiate the claim of separate books of accounts maintained for the purpose of business and the balance sheet. It is the say of the Ld. Counsel, no expenses have been charged to the profit and loss account relating to the earning of dividend income. The Ld. Counsel drew our attention to exhibit-10 of the Paper Book which is the profit and loss account in the personal books of the assessee and explained the transactions therein. The Ld. Counsel further took us to exhibit-3 which is part of the computation of income and explained how the incomes under personal accounts have been computed. The Ld. Counsel concluded by saying that in the light of these exhibits, no disallowance is to be made u/s. 14A of the Act.
Per contra, the Ld. Departmental Representative strongly supported the findings of the Revenue authorities.
We have gone through the orders of the authorities below carefully and with the assistance of the Ld. Counsel, we have also considered the relevant exhibits placed before us in the form of a paper book. In the personal Profit & Loss account, the assessee has shown income from dividends, gains from PMS, interest on deposits, interest from tax free bonds and profits/loss on sale of Mutual fund unit and shares. The total income shown is at Rs. 2,39,69,397/-. To this, the assessee has charged expenses amounting to Rs. 18,24,132/- which includes loss on PMS. The net profit has been determined at Rs. 2,21,45,265/-.
7.1. Coming to exhibit-3, the income has been considered at Rs. 2,21,45,265/- to which the expenses debited to the P&L account to the tune of Rs. 17,26,421/- have been added back. This means that the assessee has suo-moto added back the expenses amounting to Rs. 17.26 lakhs. Incidentally, the AO has not recorded his dissatisfaction to this disallowance. Moreover, a perusal of the order of the lower authorities shows that they have not even considered this factual disallowance in their respective orders. . In our considered opinion, since the assessee has suo moto disallowed Rs. 17.26 lakhs for which no dissatisfaction has been recorded by the AO. We, set aside the order of the Ld. CIT(A) and direct the AO to delete the impugned addition of Rs. 10,64,993/-.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court at the time of hearing on 8th December, 2015.