Indus Valley Investment & Finance Pvt. ... vs Assessee

This appeal by the assessee is directed against the order passed by

the CIT(A) on 10.4.2013 in relation to the assessment year 2009-10. ITA No.3763/Del/2013

2. The only issue raised before us is against the confirmation of

disallowance u/s 14A to the tune of Rs.1,05,07,322/-.

3. Succinctly, the assessee earned exempt income amounting to

Rs.25,38,020/- from investments in units of mutual funds. The assessee

suo motu offered disallowance u/s 14A for a sum of Rs.7,36,052/- being

½% of average of opening and closing balances of investment in shares

on which exempt dividend income was earned. The AO invoked the

provisions of section 14A read with Rule 8D and computed

disallowance at Rs.1.12 crore. As the assessee had offered disallowance

voluntarily at Rs.7.36 lac, he made further disallowance amounting to

Rs.1,05,07,322/-. The ld. CIT(A) upheld the addition.

4. We have heard the rival submissions and perused the relevant

material on record. It is observed that the total exempt income earned

by the assessee is to the tune of Rs.25.38 lac, against which an addition

of Rs.1.05 crore has been made. The Hon'ble Delhi High Court in Joint

Investment Pvt. Ltd. Vs. CIT, vide its judgment dated 25.2.2015, has

held that the disallowance u/s 14A cannot exceed the amount of exempt

2 ITA No.3763/Del/2013

income. The Hon'ble Delhi High Court in the case of CIT vs. Holcim

India Pvt Ltd. (2014) 90 CCH 081-DEL-HC, has held that there can be

no disallowance u/s 14A in the absence of any exempt income. The

rationale behind these judgments is that the amount of disallowance u/s

14A should not exceed the exempt income. Since the total exempt

income in the instant case is Rs.25,38,020/-, we direct that the

disallowance u/s 14A be restricted to Rs.18,01,968/- (Rs.25,38,020-

Rs.7,36,052/-). The remaining amount of disallowance is directed to be

deleted.

5. In the result, the appeal is partly allowed.

The order pronounced in the open court on 29.04.2015.

Sd/- Sd/- [C.M. GARG] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated, 29th April, 2015. dk

3 ITA No.3763/Del/2013

Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT (A) 5. DR, ITAT

AR, ITAT, NEW DELHI.

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