INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES “D”, MUMBAI

ITA No.4712/Mum/2012 : Asst.Year 2009-2010
Dy.Commissioner of Income-tax (Appellant) vs. Dr.Rama Sankaranarayana Iyer (Respondent)
Date of Order : 28-10-2015

ORDER

Per N.K.Billaiya (AM) :

This appeal by the Revenue is preferred against the order of the Commissioner of Income-tax (Appeals) – 21, Mumbai, dated 23.04.2012pertaining to assessment year 2009-2010.

2. The sole reason of the Revenue is that the CIT(A) erred in deleting addition of Rs.14,74,197 made u/s 14A of the Act. Briefly stated the facts of the case are that the assessee is rendering consultancy services as a proprietor of M/s.RGR Consultants in the field of Chemical Engineering. While scrutinizing the return of income, the AO noticed that the assessee has received dividend of Rs.1.78 crore, which was claimed exempt u/s 10(38) of the Act, along with long term capital gain claimed exempt u/s 10(34)/10(35) of the Act.

3. The assessee was asked to explain why disallowance of expenses u/s 14A read with Rule 8D should not be made. The assessee explained that he has not incurred any expenditure for earning the exempt income though he has already disallowed Rs.12,000. This explanation did not find any favour with the AO, who proceeded by computing the disallowance as per the provisions of section 14A r.w.r. 8D and the same was computed at Rs.14,74,197.

4. Aggrieved by this, the assessee carried the matter before the CIT(A) and reiterated the claim that no expenditure was incurred for earning the exempt income. After analyzing the facts in correct perspective, the CIT(A) was convinced that the expenditure u/s 14A can be disallowed only if the same has been incurred and also claimed for the purpose of earning exempt income. The CIT(A) further observed that the assessee has not deducted / claimed any expenses which could be also attributable to earning of exempt income. After thoroughly examining the income and expenditure account, which is exhibited at page 4 of the CIT(A)’s order. The CIT(A) finally concluded by holding that no disallowance u/s 14A of the Act was required in respect of administrative and managerial expenses. Since the assessee has not claimed any such expenses against taxable income offered under different heads, the disallowance made by the AO was deleted. Aggrieved by this, the Revenue is before us. The learned Departmental Representative strongly supported the finding of the AO. The Counsel for the assessee could not add anything new to what CIT(A) has already considered while giving relief to the assessee.

5. We have carefully perused the orders of the authorities below. It is an undeniable fact that the assessee has not claimed any expenses, which can be said to be attributable to earning of exempt income. As rightly mentioned by the CIT(A) that all the expenditure claimed in the income and expenditure account are directly related to the rendering of consultancy services in the field of Chemical Engineering. Neither the AO nor the learned DR could point out any expenditure that could have been incurred for earning the exempt income. We, therefore, we do not find any reason to interfere with the finding the CIT(A).

6. In the result, the appeal filed by Revenue is dismissed.

(Amarjit Singh)                         (N.K.Billaiya)
JUDICIAL MEMBER     ACCOUNTANT MEMBER