DCIT 8(2), MUMBAI vs. NIRPAN SECURITIES P.LTD, MUMBAI

This is an appeal by the Revenue against the order dated 18th December 2013, passed by the learned Commissioner (Appeals)–17, Mumbai, for the assessment year 2009–10.

Briefly the facts are, the assessee, a company, filed its return of income on 26th September 2009, declaring total income of ` 6,25,75,170, for the impugned assessment year. During the assessment proceedings, the Assessing Officer noticed that the assessee has earned tax free dividend of ` 89,32,661, but has not disallowed any expenditure towards such exempt income. When the assessee was called upon to explain why no disallowance under section 14A r/w rule 8D, has been made, the assessee stated that it has not incurred any expenditure for earning exempt income. The Assessing Officer not being satisfied with the submissions of the assessee, worked out disallowance at ` 20,08,657. Being aggrieved of such disallowance, the assessee preferred appeal before the learned Commissioner (Appeals).

Before the first appellate authority, though the assessee took a plea that no disallowance under section 14A r/w rule 8D, is called for but alternatively he also contended that, at best, 5% of the exempt income can be disallowed under section 14A of the Act. In this context, the assessee relied upon some decisions of the Tribunal. The learned Commissioner (Appeals) referring to the decision of the Tribunal, Mumbai Bench, in M/s. Arnab Griha Ltd. v/s DCIT, ITA no.5349/Mum. /

We have considered the submissions of the parties and perused the material available on record. As could be seen, the Tribunal in Arnab Griha Ltd. (supra) being conscious of the fact that rule 8D has been made applicable from the assessment year 2008–09 held that only because the assessee has earned some exempt income provisions of section 14A r/w rule 8D cannot be applied blindly. Holding as above, the Tribunal directed for disallowance of 5% of the exempt income under section 14A of the Act. The learned Commissioner (Appeals) having followed the decision of the Tribunal as aforesaid, we do not find any infirmity in the order of the learned Commissioner (Appeals). Accordingly, upholding the same, we dismiss the ground raised by the Revenue.

In the result, Revenue’s appeal stands dismissed. Order pronounced in the open Court on 16.10.2015