IN INCOME TAX APPELLATE TRIBUNAL, BENCH G , MUMBAI BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 7639/Mum/2014 for AY - 2010-11 M/s Windia Infrastructure ACIT-Range 1(3), Finance Ltd. Empire House, 214, Aayakar Bhavan, D. N. Road, A.K. Nayak Marg, V Mumbai. Fort, Mumbai-400001 s. PAN: AAACG1345D (Appellant) (Respondent) Assessee by : Shri Anuj Krisnadwala (AR) Revenue by : Shri Vivek Perampurna (Sr. DR) Date of hearing : 27.07.2016 Date of Pronouncement : 30.09.2016 ORDER PER PAWAN SINGH, JM: 1. 1. This appeal u/s. 253 of Income-tax Act is directed by assessee against order of CIT(A)-2, Mumbai dated 20.10.2014 for Assessment Year (AY) 2010-11). 2. Brief facts of case are that assessee filed return of income for relevant AY on 30.09.2010 declaring total income of Rs. 3,66,08,240/-. Initially return was processed u/s 143(1) of Act. Subsequently it was selected for scrutiny. While framing assessment, Assessing Officer (AO) observed that assessee received dividend income of Rs. 8,30,693/-, which was claimed as exempted u/s 10(34). assessee was asked to explain why disallowance u/s. 14A r.w. Rule 8D should not be invoked. assessee filed its reply and contended that there is no expenditure has incurred to earn to exempt income, therefore, no disallowance is called for. contention of assessee was not accepted and AO worked out disallowance as per section 14A r.w. Rule 8D and calculated disallowance of Rs. 5,17,407/-. the assessee has already 2 ITA No. 7639/M/2014 M/s Windia Infrastructure Finance Ltd. disallowed sum of Rs. 1,24,349/- thus sum of Rs. 3,92,508/- (5,10,407/- 1,24,349/-) was added in income of assessee. Aggrieved by order of AO, assessee filed appeal before CIT(A), wherein disallowance was restricted to Rs. 3,15,878/- holding that disallowance of Rs. 77,630/- made under rule 8D(2)(ii) was not warranted. Further aggrieved by order of AO, assessee filed present appeal before us against sustaining disallowance of Rs. 3,15,878/- u/s. 14A of Act. 3. We have heard Ld. Authorised Representative (AR) of assessee and Ld. Departmental Representative (DR) for Revenue and perused material available on record. Ld. AR for assessee argued that assessee has made investment only in subsidiaries and its group concerns. No administrative Cost was incurred and hence no disallowance was called for u/s 14A r.w. Rule 8D(2)(iii). Ld. AR of assessee further argued that disallowance made by AO on administrative expenses is too excessive. AO disallowed Rs. 4,39,777/- which is 19.55% of dividend income of Rs. 8,30,613/-. It was further argued that AO has not recorded any dissatisfaction before calculating disallowance. On other hand, ld. DR for Revenue argued that assessee has not attributed any expenses toward earning of exempt income. It was further argued that administrative expenses as well as other related expenses relating to earning dividend income as well as proportionate part of other expenditure should be disallowed. Ld. DR for Revenue submitted that ld. CIT(A) has already given relief of Rule 8D(2)(ii) to assessee. Ld. DR for Revenue vehemently supported order of authorities below. 4. We have considered rival contentions of ld. representatives assessee has claimed to have earned exempt income of Rs. 8,30,613/- during year under consideration. assessee disallowed sum of Rs. 1,24,349/-. AO has not recorded his dissatisfaction about voluntary disallowance made by assessee before invoking Rule 8D, assessee further contended before Revenue authorities that assessee has sufficient interest free funds available with them to make investment in securities. assessee made investment in subsidiary and group companies, details and break ups of investment were 3 ITA No. 7639/M/2014 M/s Windia Infrastructure Finance Ltd. provided during assessment proceeding as well as at first appellate stage. AO instead of considering submission and material supplied invoked provision of Rule 8D, assessee has own fund at Rs. 46.61 crore which were sufficient to take care of investment activities of assessee. contention of assessee that he has not incurred any expenditure for earning dividend income is not acceptable blindly. Hence, we are of view that it would be proper to make disallowance of administrative expenses of Rs. 50,000/- for earning dividend income, which would meet end of justice. Thus, total disallowance would be Rs. 1,24,349/- plus Rs. 50,000/- u/s 14A of Act. AO is directed accordingly. With this observation appeal of assessee is allowed in above terms. 5. In result, appeal filed by assessee is allowed. Order pronounced in open court on 30th September 2016. Sd/- Sd/- (B.R.BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 30/09/2016 S.K.PS Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy/ (Asstt.Registrar) ITAT, Mumbai M/s Windia Infrastructure Finance Ltd. v. ACIT-Range 1(3), Mumbai