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Jayantilal Khandwala & Sons 201,Stock Exchange, Dalal Strt. Fort, Mumbai 400023 Vs Income Tax Officer 12(1)(4) Aayakar Bhavan, MK Road Mumbai 400020
June, 07th 2012
                           ITA Nos 4162 3707 4931 and 6044 Jayantilal Khandwala & Sons-J Bench

                       "J" Bench, Mumbai

       Before Shri B. Ramakotaiah, Accountant Member and
                Shri S.S. Godara, Judicial Member

                     ITA Nos.4162/Mum/2008
                     (Assessment years: 2000-01)

Jayantilal Khandwala & Sons                   Income Tax Officer 12(1)(4)
201,Stock Exchange, Dalal Strt.               Aayakar Bhavan, MK Road
Fort, Mumbai 400023                           Mumbai 400020
PAN No. AAAF 4525 F
(Appellant)                                   (Respondent)

                   Assessee by:   Shri D. Bhaskara Rao,
                   Department by: Shri D.S.Sunder Singh, DR

                   Date of Hearing:                       28/05/2012
                   Date of Pronouncement:                 06/06/2012


 Per B. Ramakotaiah, A.M.

       This is an assessee's appeal in which assessee raised four
 grounds on the issue of section 14A. AO on noticing that assessee
 had earned dividend income of `1,54,80,674/- considered an
 amount of 5% as expenses towards earning dividend income which
 was exempt. Accordingly he disallowed an amount of `.7,74,033/-.
 2.    Before the CIT (A) it was submitted that assessee was
 maintaining separate ledger accounts with reference to separate
 expenses under each head of income and assessee had both shares
 in trading account as well as investment a/c and the disallowance
 of 5% expenditure is arbitrary and excessive. The CIT (A) upheld the
 estimation of expenses and confirmed the action of AO.

 3.    Before us the learned Counsel submitted that assessee
 income included short term capital gain, long term capital gain and
 also business income and the dividend was earned both under
 trading a/c as well as investment a/c. It was submitted that even
 though the disallowance per se is not disputed, what is disputed is
 the quantum of disallowance. The learned DR relied on the orders of
 the CIT (A).
                                   Page 1 of 2

                         ITA Nos 4162 3707 4931 and 6044 Jayantilal Khandwala & Sons-J Bench

4.    We have considered the issue. Considering the facts of the
case and the amount of dividend earned, we are of the opinion that
there is no need to estimate the expenditure at 5% on the dividend
earned. It was assessee's submissions that the dividend income was
earned both on the shares held in trading a/c as well as in
investment a/c. However, the learned Counsel fairly admitted that
they could not bifurcate the dividend income earned on the above
two accounts. Considering the above facts, we are of the view that
the disallowance of 2% of the amount, which the ITAT is
consistently considering in a number of cases, would meet the ends
of justice. Accordingly AO is directed to disallow only 2% of the
gross dividend income as expenditure relatable to earning exempt
income under section 14A. Accordingly this ground is partly

5.    In the result the appeal is partly allowed.

      Order pronounced in the open court on 6th June, 2012.

             Sd/-                                       Sd/-
         (S.S.Godara)                             (B. Ramakotaiah)
       Judicial Member                           Accountant Member

Mumbai, dated 6th June, 2012.
Copy to:
  1. The Appellant
  2. The Respondent
  3. The concerned CIT(A)
  4. The concerned CIT
  5. The DR, "J" Bench, ITAT, Mumbai

                               By Order

                        Assistant Registrar
                   Income Tax Appellate Tribunal,
                     Mumbai Benches, MUMBAI

                                   Page 2 of 2

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