IN INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI . , , BEFORE SHRI D. MANMOHAN, V. P. AND SHRI SANJAY ARORA, A. M. ./I.T.A. No.8853/Mum/2010 ( [ [ / Assessment Year: 2007-08) [ N. Bhau (Jewellers) Pvt. Ltd. Income-tax Officer 5(2)(1), Bhaskar Mansion, Aayakar Bhavan, M. K. Road, 437, Dr. Dadasaheb Bhadkamkar Marg, / Mumbair-400 020 Lamington Road, Opera House, Vs. Mumbai-400 004 . / . /PAN : AAACN 1168 P ( /Appellant) : ( / Respondent) / Appellant by : Shri Hitesh Trivedi /Respondent by : Shri Mohit Jain / : 24.01.2013 Date of Hearing / : 19.04.2013 Date of Pronouncement / O R D E R Per Sanjay Arora, A. M.: This is Appeal by Assessee directed against Order by Commissioner of Income Tax (Appeals)-9, Mumbai ( CIT(A) for short) dated 08.10.2010, dismissing assessee s appeal contesting its assessment u/s.143(3) of Income Tax Act, 1961 ( Act hereinafter) for assessment year (A.Y.) 2007-08 vide order dated 24.12.2009. 2 ITA No.8853/Mum/2010 (A.Y. 2007-08) N. Bhau (Jewellers) Pvt. Ltd. vs. ITO 2. appeal raises single issue, i.e., validity in law of disallowance u/s.14A in sum of Rs.1,08,843/- in respect of dividend income of Rs.63.05 lakhs, claimed tax-exempt u/s.10(34) of Act. 3.1 assessee pleads its case on basis that disallowance is effected under Rule 8D of Income Tax Rules, 1962, i.e., qua indirect expenses, while said rule becomes mandatory only w.e.f. A.Y. 2008-09. Further, even as regards indirect expenses, it had actually not incurred any expenditure in respect of tax-free dividend income, which stands earned only on investment in five (5) Mutual Funds (MFs) per eight (8) dividend vouchers. Further, there has been no purchase and sale of investment during relevant year. Assessing Officer (AO) has not recorded any finding in relation to assessee s said claim u/s. 14A(2) and, accordingly, no disallowance u/s. 14A(1) could be made by him. 3.2 Revenue's case, on other hand, is that even though rule 8D is not applicable for current year, disallowance is quintessentially u/s.14A, which is without doubt applicable. In fact, even hon'ble jurisdictional High Court in case of Godrej Boyce Mfg. Co. Ltd. [2010] 328 ITR 81 (Bom) has confirmed legal position that disallowance there-under on some reasonable basis, i.e., for years prior to A.Y. 2008-09, would arise. assessee has maintained average investment in MFs at Rs.217.69 lakhs for current year, so that disallowance, imputed at 0.5% thereof, cannot be said to be not reasonable, i.e., on facts. 4. We have heard parties, and perused material on record. assessee is in business of manufacture of jewellery and, as appears to be admitted position, has invested in MFs out of interest-free loans from directors. If, as contended, there has been no purchase and sale of shares/units during year, entire investment (approximating to Rs.218 lakhs) is carried over from earlier year. Accordingly, no disallowance in respect of interest (financing component) of said investment has been made, which, though, has been in impugned sum qua administrative expenses only. 3 ITA No.8853/Mum/2010 (A.Y. 2007-08) N. Bhau (Jewellers) Pvt. Ltd. vs. ITO assessee, as apparent from assessment order, has made no disallowance of its own whatsoever; working of disallowance at Rs. 86/- toward administrative expenses having been furnished only before first appellate authority at his instance. same takes into account salary of accountant and peon only. same stood rejected by ld. CIT(A), and in our view not incorrectly. decision of investing in MFs, identifying same, and its periodic review, which may or may not result in change in composition of investment, is made by top management. To say, therefore, that maintaining investment involves no cost, or is costless exercise, is in disregard of reality and misconceived. This is precisely what ld. CIT(A) seeks to emphasize when he refers to salary of directors for year at Rs.9.80 lakhs. True, it is incumbent on A.O. to record dissatisfaction with correctness of assessee's claim in respect of expenses in relation to tax-exempt income u/s.14A(2), before he could affect disallowance u/s.14A(1). However, primary onus for making claim is on assessee. assessee is not maintaining its accounts on unit-wise basis. Merely stating that no expenditure stands incurred, de hors obtaining facts, would not amount to making valid claim. It is toward such plea, so that A.O. may yet proceed to estimate expenses incurred in relation to such income u/s. 14A(2), that section 14A(3) stands provided for in section. In any case, recording of dissatisfaction by ld. CIT(A) in confirming disallowance, before whom working aforesaid was given by assessee, effectively meets mandate of s. 14A(2). Before us, assessee has made out no case in relation to disallowance, at 1.72% of dividend income, as being not reasonable. We, accordingly, confirm impugned order, finding no infirmity therein. We are aware that tribunal for immediately preceding year, i.e., A.Y. 2006-07 (in ITA No.2249/Mum/2010 dated 28.02.2011), has restored matter back to file of A.O. for examination in light of decision in case of Godrej Boyce Mfg. Co. Ltd. (supra). However, for current year, that is exactly what authorities below have sought to do, so that this is precisely what we were called upon to adjudicate. In fact, reasonableness of disallowance, which is at less than 2% in instant case (as against at 5.60% for that 4 ITA No.8853/Mum/2010 (A.Y. 2007-08) N. Bhau (Jewellers) Pvt. Ltd. vs. ITO year) was, as afore-noted, not in issue, while that is precisely ground on which remand to assessing authority stands made by tribunal for that year. assessee's case, as would be apparent from foregoing, as well as grounds raised, is based on legal plea of non-recording of dissatisfaction u/s.14A(2), and which has been met by us. order by tribunal for A.Y. 2006-07, therefore, shall, in our considered view, not govern assessee's case for current year. We decide accordingly. 5. In result, assessee's appeal is dismissed. [ Order pronounced in open court on 19th April, 2013 19th April, 2013 Sd/- Sd/- (D. MANMOHAN) ( SANJAY ARORA ) / VICE PRESIDENT / ACCOUNTANT MEMBER Mumbai; Dated : 19.04.2013 . . ./Roshani, Sr. PS / Copy of Order forwarded to : 1. / Appellant 2. / Respondent. 3. ( ) / CIT(A) 4. / CIT - concerned 5. , , / DR, ITAT, Mumbai 6. [ / Guard file. / BY ORDER, / / (Dy./Asstt. Registrar) , / ITAT, Mumbai , N. Bhau (Jewellers ) P. Ltd v. ITO 5(2)(1)