IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES `D' MUMBAI
BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND
SHRI RAJENDRA, ACCOUNTANT MEMBER
. / ITA No.5592/MUM/2012
[ [ /Assessment Year: 2009-10
M/s Daga Global Chemicals Asst. Commissioner Income
Pvt. Ltd.(Formerly Known as Tax-9(1),
Daga Global Chemicals Ltd.), Room No.223, Aaykar
Vs.
101, Mahek Plaza, Off L.T. Bhavan, Marine Lines,
Road, Maharashtra, Nagar Mumbai-400020
Lane, Borivali(W),
Mumbai-400092
([ /Assessee) (× /Respondent)
P.A. NUMBER : AAACD2233M
[ /Revenue by : Dr. K.Shivaram & Shri
Rahul Hakani
× /Revenue by Shri Akhilendra Yadav
/ 01/01/2015
Date of Hearing :
/ 01/01/2015
Date of Pronouncement :
ORDER
PER JOGINDER SINGH, JM:
The assessee is aggrieved by the impugned order dated
02/07/2012 of the ld. First Appellate Authority, Mumbai. The
assessee has raised the following grounds:
2 M/s Daga Global Chemicals Pvt. Ltd,
.
1.The ld. Commissioner of Income tax (Appeals) erred in
confirming disallowance of Rs.14,58,112/- u/s 14A r.w.
Rule 8D without appreciating that no expenditure directly or
indirectly was incurred during this year for earning exempt
income and investments in shares were made in earlier
years out of own fund and not out of borrowed found and
hence disallowance u/s.14A r.w. Rule 8D may be deleted.
2. The learned CIT(A) failed to appreciate that dividend income
is directly credited to Bank Account and appellant does not
have to incur any expenditure for earning exempt income
and hence disallowance u/s. 14A r.w. Rule 8D may be
deleted.
3. The learned CIT(A) failed to appreciate that interest
expenditure of Rs.2,35,49,746/- has no nexus with earning
of exempt income as the investments on which exempt
income is earned is out of own funds and hence
disallowance u/s14A r.w. Rule8D may be deleted.
4. The learned CIT(A) erred in holding that A.O. duly recorded
satisfaction before invoking section 14A r.w. Rule 8D
without appreciating the fact that assessee had shown
bifurcation of Financial expenses to A.O. to show that
interest expense was not incurred for investment in shares
or for earning exempt dividend income and A.O. did not
reject the same and still A.O. applied Rule 8D in an
automatic fashion and hence, no satisfaction was recorded
by A.O. as required u/s 14A before invoking Rule 8D.
3 M/s Daga Global Chemicals Pvt. Ltd,
.
5. The learned CIT(A) failed to appreciate that disallowance
u/s 14A read with Rule 8D cannot exceed exempt income.
6. Without prejudice to above, dividend received during this
year is only Rs.1,82,262/- and demat charges are
Rs.1,485/-, hence the disallowance may be restricted to
maximum Rs.1,485/-.
2. At the time of hearing, Dr. K.Shivaram alongwith Shri Rahul
Hakani, ld. counsels for the assessee advanced their arguments
which are identical to the ground raised by submitting that no
expenditure directly or indirectly was incurred by the assessee for
earning exempt income and further the investment in shares was
made in earlier years out of own funds and not out of borrowed
funds, therefore, no disallowance u/s 14A r.w. Rule 8D is to be
made.
2.1. On the other hand, Shri Akhilendra Yadav strongly defended
the conclusion arrived at by the ld. Commissioner of Income tax
(Appeals) by contending that a well reasoned order has been
passed by the ld. First Appellate Authority as apportionment of
expenditure for earning the dividend income was done as per the
provisions of the Act. It was pleaded that section 14A r.w. Rule 8D
of the Rules is clearly applicable to the facts of the present appeal.
2.2. We have considered the rival submissions and perused the
material available on record. 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/-. On appeal, before the ld.
Commissioner of Income tax (Appeals) broadly the stand taken in
the assessment order was affirmed against which the assessee is
in further appeal before this Tribunal. 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. What it may be, we
find that the 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 the
facts available on record. It was also explained by the ld. 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. 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 the exempt income. In view of
this fact, we find merit in the claim of the assessee. The appeal of
the assessee is therefore, allowed.
5 M/s Daga Global Chemicals Pvt. Ltd,
.
Finally, the appeal of the assessee is allowed.
This order was pronounced in the open court in the
presence of ld. Representatives from both sides at the conclusion
of the hearing on 01/01/2015.
Sd/- Sd/-
(RAJENDRA) (JOGINDER SINGH )
ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED - 01/01/2015
f{x~{tÜ? P.S/...
/Copy of the Order forwarded to :
1. / The Appellant
2. × / The Respondent.
3. () / The CIT(A)-
4. / CIT
5. , , / DR, ITAT, Mumbai
6. [ / Guard file.
/ BY ORDER,
× //True Copy//
/ (Dy./Asstt. Registrar)
, / ITAT, Mumbai
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