Rehab Housing P. Ltd Mumbai

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IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI
BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER
AND SHRI RAM LAL NEGI, JUDICIAL MEMBER
I.T.A. No. 6276/M/2013 (AY: 2010-2011)
Rehab Housing Pvt Ltd, ????/ ACIT – CC- 9,
th th
Gitaneel Arcade, 5 Floor, R.No.1001, 10 Floor,
Vs.
85, Hill Road, Bandra (W), Old CGO Bldg, M.K. Road,
Mumbai – Churchgate, Mumbai – 20.

?????? ???? ??./PAN : AABCR6883Q

(??????? /Appellant) .. (???????? / Respondent)

??????? ?? ?? ?? / Appellant by : Shri Dilip Lakhani

???????? ?? ?? ??/ Respondent by : Shri Prakash L. Pathak

??? ??? ?? ????? /Date of Hearing : 03.11.2015

????? ?? ????? /Date of Pronouncement : 03.11.2015

???? / O R D E R

PER D. KARUNAKARA RAO, AM:

This appeal filed by the assessee on 28.10.2013 is against the order of the

CIT (A)-37, Mumbai dated 10.9.2013 for the assessment year 2010-2011.

2. In this appeal, the solitary issue, which is the subject matter of adjudication

before us relates to the disallowance u/s 14A of the Act. Brief facts in this regard are

that in the assessment, AO made a disallowance of Rs. 31,885/- under clause (ii) of

Rule 8D(2) and also made another disallowance under clause (iii) of Rule 8D(2) of

the IT Rules, 1962. On appeal, CIT (A) dismissed the appeal.

3. Before us, at the outset, Ld Counsel for the assessee submitted that this is a

case where no interest was ever paid by the assessee as evident from the Profit &

Loss Account. Referring to the sum of Rs. 1,62,769/- on account of „interest

expenses? appear in the books of account, Ld Counsel for the assessee brought our

attention to page 46 of the paper book and the contents of para 6, ie the

submissions of the assessee dated 26.8.2013 filed before the CIT (A) on 2.9.2013,

and mentioned that the said sums relate to the loss of interest on the fixed deposit,
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which was prematurely terminated and also towards delayed payment and they have

nothing to do with the investment in shares / mutual funds in any form. On perusal

of the said submissions, we find this is a case where the Revenue Authorities

mechanically invoked the provisions of section 14A read with Rule 8D of the Rules,

without going into the nitty gritty of the interest account. It is unfortunate that the

officers of the Department could not find difference between “the interest

expenditure on the loan borrowed” and “the interest loss on account of premature

termination of the FDs” with banks. The later is the case here. After hearing the Ld

Representatives of both the parties, we are of the opinion that clause (ii) of Rule 8D

of the Rules need not be invoked for making any disallowance. To that extent,

assessee gets relief. Accordingly, AO is ordered.

4. Regarding the disallowance made under clause (iii) of the Rule 8D(2), Ld

Counsel for the assessee relied on various legal propositions. In this regard, he

brought our attention to each and every account of the Profit & Loss Account and

submitted that none of these expenses are directly relatable to the earning of the

dividend income. Notwithstanding the said arguments, Ld Counsel for the assessee

brought our attention to the order of the AO for the earlier AY 2009-2010 and

demonstrated that the officers accepted the assessee?s submission of restricting the

disallowance to the amount of Rs. 4,89,834/- u/s 14A of the Act. In this regard, he

mentioned that the same amount was arrived at after establishing the proportion to

the dividend income qua dividend yielding investment. In this regard, he brought

our attention to page 44 of the paper book to demonstrate that no expenditure was

incurred towards advisors and agents. Further, he brought our attention to page 30

of the PB, which the computation of disallowance u/s 14A of the Act applying the

similar formula of proportion between the exempt income versus dividend yielding

investment.

5. After hearing both the parties and on perusal of the said page 30 of the PB,

we find the disallowance of Rs. 4,54,399/- is in tune with the decision of the AO for

the AY 2009-2010. No specific reason is brought our before us as to why the similar

formula should not be followed for this year also instead of mechanically adopting

the formula laid down in Rule 8D(2) of the Rules. Considering the same, we direct
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the AO to follow the method adopted by him for the earlier AY 2009-2010 and

restrict the disallowance to Rs. 4,54,400/- (rounded of). Accordingly, grounds raised

by the assessee are partly allowed.

6. In the result, appeal of the assessee is partly allowed.

rd
Order pronounced in the open court on 3 November, 2015.

Sd/- Sd/-
(RAM LAL NEGI) (D. KARUNAKARA RAO)
JUDICIAL MEMBER ACCOUNTANT MEMBER
???? ? Mumbai; ?????? 3.11.2015
?.??.?./ OKK , Sr. PS
???? ?? ????????? ????????/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.

???????? ????? //True Copy//
???????? ??/ BY ORDER,
??/????? ??????? (Dy./Asstt. Registrar)
???? ?????? ??????, ???? ? / ITAT, Mumbai

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