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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SANJAY ARORA, AM
सुनवाई क� तार�ख / : 16.11.2015 Date of Hearing Date of Order : 04.12.2015 आदेश / O R D E R Per Sanjay Arora, A. M.: This is an Appeal by the Revenue directed against the Order by the Commissioner of Income Tax (Appeals)-36, Mumbai (‘CIT(A)’ for short) dated 13.10.2014, partly allowing the Assessee’s appeal contesting its assessment u/s.143(3) r/w s. 153C of the Income Tax Act, 1961 (‘the Act’ hereinafter) for the assessment year (A.Y.) 2010-11 vide order dated 28.3.2013.
(A.Y. 2010-11) Dy. CIT vs. Vrindavan Services Pvt. Ltd.
None appeared for and on behalf of the assessee-respondent when the appeal was called out for hearing, nor even any adjournment motion stands moved. This, despite the date of hearing being communicated to the assessee’s counsel, Shri Rishabh Shah, CA on the last date of hearing, i.e., 04.11.2015. It was accordingly considered proper that the hearing in the matter be proceeded with, deciding the instant appeal after hearing the appellant, taking the material on record into account.
The only issue arising per the appeal is the quantum of disallowance exigible u/s.14A of the Act. The facts, to the extent relevant, are that the assessee, per its return filed in response to notice u/s.153C, revised the disallowance u/s.14A made in respect of its’ exempt dividend income of Rs.166.34 lacs to Rs.42,62,962/-, as against the disallowance of Rs.1,09,56,131/- effected per the original return. The Assessing Officer (A.O.) restored the disallowance to that made earlier on the ground that no satisfactory justification had been given for the said reduction. In appeal, it was explained by the assessee that the working of the disallowance was in terms of Rule 8D of the Income Tax Rules, 1962 (‘the Rules’ hereinafter). There was in fact no difference between the first and the second working (of the disallowance) in respect of the amounts worked out under rule 8D(2)(i) and (ii), i.e., qua direct expenditure and indirect, interest expenditure relatable to the exempt income/s. The only difference is qua the indirect, administrative expenditure, referable to rule 8D(2)(iii). The same was initially worked at Rs.77,74,965/-, i.e., at 0.5% of the average value of the investments (Rs.155.50 lacs), while per the subsequent (s.153C) return was limited to the actual administrative expenditure debited to the profit and loss account. The same found favour with the ld. CIT(A), who held as under: ‘ 6.4 The AO is directed to recompute the disallowance u/s.14A applying Rule 8D and restricting the disallowance under rule 8D(iii) to the administrative expenses actually claimed in P & L account. The ground of appeal is allowed.’ (A.Y. 2010-11) Dy. CIT vs. Vrindavan Services Pvt. Ltd. Aggrieved, the Revenue is in appeal.
4. The appellant was heard, and the material on record perused. During hearing, the Bench examined the assessee’s working of the disallowance under rule 8D(2)(iii) (PB pgs.28- 29), as also the profit and loss account (PB pg. 2), to find that it had included the entire administrative expenditure debited therein in computing the disallowance u/r.8D(2)(iii). The ld. Departmental Representative (DR) could not dispute the facts and figures. The profit and loss account itself bears a total load of Rs.10,81,795/-, i.e., on account of indirect, administrative expenditure. By no such stretch of imagination the disallowance u/s.14A could exceed the said amount. Rather, the said expenditure could not, in the ordinary course of events, be said to be entirely against the tax- exempt income, which would imply that no part of it is toward the assessee’s other, regular income, which is also substantial. Be that as it may, in view of the deeming of rule 8D(2)(iii), the said expenditure being lower than the statutory estimate at 0.5% of the average investment, the assessee has adopted the entire such expenditure while working the disallowance under rule 8D(2)(iii), which has led to the variation between the disallowance returned by the assessee per its’ two returns. How, it is wondered, could the same be disputed? The disallowance u/s.14A is only of the expenditure incurred and claimed toward the income chargeable to tax, i.e., to the extent it can be regarded as toward income not forming part of the total income. The ld. CIT(A) has in fact not even quantified such expenditure, i.e., on account of indirect administrative expenditure, or issued any finding in its respect, even as it does not appear to be in dispute, only issuing directions to the Assessing Officer in the matter. I find no infirmity whatsoever in his direction. No ground for interference is made out. I decide accordingly.