9911796707
TMI Blog2019 (5) TMI 992X X X X Extracts X X X X X X X X Extracts X X X X ..... char, Accountant Member For the Assessee : Shri. Apurva Shah For the Revenue : Miss. Deepika Arora (DR) ORDER PER RAMIT KOCHAR, ACCOUNTANT MEMBER: This appeal, filed by assessee, being ITA No. 6600/Mum/2017, is directed against appellate order dated 22.09.2017 in appeal no. CIT(A)-6/IT/8/2016-17, passed by learned Commissioner of Income Tax (Appeals)-6, Mumbai (hereinafter called the CIT(A) ), for assessment year 2010-11, the appellate proceedings had arisen before learned CIT(A) from the assessment order dated 05.03.2013 passed by learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Income-tax Act, 1961 (hereinafter called the Act ) for AY 2010-11. 2. The grounds of appeal raised by assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called the tribunal ) read as under:- The Commissioner of Income Tax (Appeals) - 6, Mumbai erred:- 1.1 in confirming an addition u/s 14A of ₹ 34,93,693/-. 1.1.1 in holding that the method adopted by the Appellant to estimate exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the principles of apportionment of expenses (those incurred to earn exempt income and non exempt income) and based on proximate relationship between expenditure incurred and the income which does not form part of total income. Without prejudice, we respectfully submit that a reasonable estimation of such expenses, at best, could be as follows; Head Office administrative Expenses A ₹ 7,28,59,665/- Dividend Income B ₹ 4,01,399/- Sales and other income C ₹ 12,21, 90,39,009/- Proportionate disallowance of indirect expenses u/s 14A A x B / ₹ 2,393/- Direct expenses (demat charges) ₹ 1.324/- Total ₹ 3,717/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Sales and other income multiplied by Head Office Administrative Expenses. The AO, in the assessment order, has clearly observed that the estimation of expenses related to its exempted income was not based on any logic or sound footings. Therefore, he was not satisfied with the claim made by the assessee in this regard. It is seen that the assessee has applied the ratio of Dividend income over total Sales and other income for allowing such portion of Head Office or Administrative Expenses which would be attributable to the earning of the dividend income by the assessee. Considering the Sales and other income totalling to ₹ 12,21,90,39,009/- as a denominator defies any logic. If at all there was a ratio to be taken of dividend income, it should have been taken over the net profit of the assessee as per the books 'maintained by it. There is no logic to consider the top line i.e. Sales and other income as denominator for computing ratio of exempt income to the total income of the assessee. Under such facts and circumstances, the action of the AO in invoking Rule 8D is found to be justified. The assessee, in its submission, has relied upon the decision of H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has further contended that following the ratio of Allahabad High Court in the case of Shivam Motors, the investments where no dividends have been received during the year should be excluded and they have further mentioned that since there was no dividend earned this year, there should be no disallowance. In this respect, it is stated that the assessee has .earned dividend of ₹ 4,01,399/- which has been claimed exempt u/s.10. This finds place even in the submission filed before the AO during the course of assessment proceedings vide their letter dated 02.01.2013 which has been reproduced by the AO at para 4.1 of his order and further the fact of having earned dividend income of ₹ 4,01,399/- has also been mentioned in their statement of facts filed with the instant appeal. Accordingly, such an assertion that they have not earned any dividend income during the year and therefore there should be no disallowance is not found to be correct. 6.5 In view of the facts and circumstances of the case and discussion hereinabove, the contentions and submissions of the assessee are not found to be acceptable and are therefore, rejected. Accordingly, the only groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king ratio of dividend income to sales and other income , then multiplying the same by Head Office administrative expenses. The AO invoked provisions of Section 14A of the 1961 Act r.w.r. 8D2(iii) of the 1962 Rules to made disallowance of ₹ 34,93,693/- by taking formula of 0.5% of average investments held by the assessee. The said disallowance was later confirmed by Ld. CIT(A) after considering the entire material on record including case laws cited by the assessee. We have gone through the entire factual matrix of the case and we are of the considered view that the provision of section 14A are clearly applicable to the assessee as the assessee had made investments to the tune of ₹ 69.69 crores out of which investment of ₹ 68.10 crores was made in investments in units and shares which generates tax-free income. The assessee had made disallowance of expenditure of ₹ 1,324/- toward direct expenses being demat charges while disallowance of expenditure was made of an amount of ₹ 2,393/- based on ratio of dividend income over sales and other income, then multiplying the same with head office administrative expenses, claimed by the assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
