Ameet S. Gandhi v. The Astt. Commissioner of Income-tax-11, Mumbai
[Citation -2016-LL-1018-56]

Citation 2016-LL-1018-56
Appellant Name Ameet S. Gandhi
Respondent Name The Astt. Commissioner of Income-tax-11, Mumbai
Court ITAT-Mumbai
Relevant Act Income-tax
Date of Order 18/10/2016
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags exempted income • motor car
Bot Summary: At the outset, the learned Counsel for the assessee stated that the assessee has earned dividend income to the extent of Rs.77,784/- and disallowance made by the AO by invoking the provisions of Section 14A of the Act read with Rule 8D of the Rules to the extent of Rs.1,51,558/- which is more than the exempted income. The facts, in brief, are that the assessee is a limited company, engaged in trading of bulk and fine, chemicals, solvent and pharmaceutical raw materials declared its 4 M/s Daga Global Chemicals Pvt. Ltd,. income at Rs.74,40,000/- on 26/09/2009. The assessee credited dividend income of Rs.1,82,262/- in its profit and loss account. The Assessing Officer while framing the assessment invoke section 14A r.w. Rule 8D by contending that assessee claimed various expenses which are related to exempt income in its profit loss account and disallowed Rs.14,58,412/-. The totality of facts clearly indicates, as claimed by the assessee that no borrowed funds were utilized for earning the exempt income by the assessee and further the dividend were directly credited in the bank account of the assessee and no expenditure was claimed. Counsel for the assessee that on identical fact in earlier years, no disallowance was made. In the present assessment year also, no borrowed funds were invested by the assessee for making investment in shares or for earning dividend income.


IN INCOME TAX APPELLATE TRIBUNAL BENCH, MUMBAI BEFORE SRI MAHAVIR SINGH, JM AND SRI RAMIT KOCHAR, AM ITA No.8860/Mum/2011 (A.Y:2008-09) Shri Ameet S. Gandhi, Flat No.10, Vs. Astt. Commissioner of 4th Floor, Gandhi House, Palmera, Income Tax- 11, Altamoount Road, Mumbai -26 Mumbai 400 020. PAN:ACRP0766E Appellant Respondent Appellant by Shri Bharat Gandhi, AR Respondent by .. Shri A. Ramachandran, DR Date of hearing .. 18-10-2016 Date of pronouncement .. 18- 10- 2016 ORDER PER MAHAVIR SINGH, JM: This appeal by assessee is arising out of order of CIT (A)-3, Mumbai in appeal No.CIT (A)-3/ACIT-11(2)/IT-247/2010-11 dated 31-10-2011. Assessment was framed by DCIT, Circle-11, Mumbai for assessment year 2008-09 vide his order dated 10-12-2010 u/s 143(3) of Income Tax Act, 1961 (hereinafter Act ). 2. first issue in this appeal of assessee is against order of CIT (A) confirming disallowance of expenses relatable to exempted income by invoking provisions of Section 14A of Act read with 8D of Income Tax Rules, 1962 (hereinafter Rules ). 3. At outset, learned Counsel for assessee stated that assessee has earned dividend income to extent of Rs.77,784/- and disallowance made by AO by invoking provisions of Section 14A of Act read with Rule 8D of Rules to extent of Rs.1,51,558/- which is more than exempted income. learned Counsel for assessee only requested for restricting disallowance to extent of exempted income and for this he relied on Co- ordinate Bench decision in case of Daga Global Chemicals Pvt. Ltd. Vs. 2 ITA No.8860/Mum/2011 ACIT dated 01-01-2015 in ITA No.5592/Mum/2012 for assessment year 2009-10, wherein it has been held in Para 2.2 as under:- 2.2. We have considered rival submissions and perused material available on record. facts, in brief, are that assessee is limited company, engaged in trading of bulk and fine, chemicals, solvent and pharmaceutical raw materials declared its 4 M/s Daga Global Chemicals Pvt. Ltd, . income at Rs.74,40,000/- on 26/09/2009. assessee credited dividend income of Rs.1,82,262/- in its profit and loss account. Assessing Officer while framing assessment invoke section 14A r.w. Rule 8D by contending that assessee claimed various expenses which are related to exempt income in its profit & loss account and disallowed Rs.14,58,412/-. On appeal, before ld. Commissioner of Income tax (Appeals) broadly stand taken in assessment order was affirmed against which assessee is in further appeal before this Tribunal. totality of facts clearly indicates, as claimed by assessee that no borrowed funds were utilized for earning exempt income by assessee and further dividend were directly credited in bank account of assessee and no expenditure was claimed. What it may be, we find that assessee only received Rs.1,82,362/- as dividend income, therefore, there is no question of disallowance of Rs.14,58.412/- by invoking section 14A r.w. Rule 8D under facts available on record. It was also explained by ld. counsel for assessee that on identical fact in earlier years, no disallowance was made. In present assessment year also, no borrowed funds were invested by assessee for making investment in shares or for earning dividend income. At best, if any disallowance could be made that can be restricted to Rs. 1,485/- which were claimed as demat charges. Disallowance u/s 14A r. w. Rule 8D cannot exceed exempt income. In view of this fact, we find merit in claim of assessee. appeal of assessee is therefore, allowed . Accordingly, he requested Bench to restrict disallowance to exempt income only i. e. to extent of Rs.77,784/-. 4. After hearing both sides and going through facts and circumstances of case, we find that assessee has received dividend income of Rs.77,784/- which is claimed as exempt. We find that this issue is covered by Coordinate Bench decision in case of Daga Global Chemicals Pvt. Ltd. (supra). Respectfully following same, we restrict disallowance at Rs.77,784/- and hence, this issue of assessee s appeal is partly allowed.Our view is fortified by recent decision of Hon ble Delhi High Court in case of Cheminvest Limited v. CIT 378 ITR 33(Delhi). 3 ITA No.8860/Mum/2011 5. next issue of this appeal of assessee is against order of CIT (A) confirming disallowance out of expenses at Rs.54,480/- out of total expenses at Rs.2,72,401/- on account of motor car, insurance on car , motor car expense and telephone expenses telephone expenses. 6. We have heard rival contentions on this issue and gone through facts and circumstances of case. We find that total expenses on account of depreciation on motor car, insurance on car, motor car expense and telephone expenses telephone expenses was claimed by assessee in aggregate at Rs.2,72,480/-. AO disallowed 1/5th of same at Rs.54,480/- and CIT (A) confirmed same on ad hoc basis. We find that disallowance in aggregate from all expenses at 1/5th is higher and hence, we restrict disallowance at 1/10th of total expenses. We direct AO accordingly. This issue of assessee s appeal is partly allowed. 4. In result, appeal of assessee is partly allowed. Order pronounced in open court on 18-10-2016. Sd/ Sd/ (RAMIT KOCHAR) (MAHAVIR SINGH) ACCONTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 18-10-2016 Lakshmikanta Deka/Sr.PS Copy of Order forwarded to: 1. Appellant 2. Respondent. 3. CIT (A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER, Assistant Registrar ITAT, MUMBAI Ameet S. Gandhi v. Astt. Commissioner of Income-tax-11, Mumbai
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