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M/s. Diligent Investment Ltd., 155, Maker Tower J. Cuff Parad, Mumbai - 20 Vs. The Income Tax Officer 3(1)(2), Mumbai
September, 28th 2015
                MUMBAI "D" BENCH, MUMBAI


                       ITA. No. 2224/Mum/2013
                      (Assessment Year:2009-10)

M/s. Diligent Investment Ltd.,
155, Maker Tower J. Cuff Parad,
Mumbai - 20                                        Appellant


The Income Tax Officer ­ 3(1)(2),
Mumbai                                                 Respondent


         /By Appellant :Shri Mahaveer Jain, A.R.
        /By Respondent :Shri Jeetendra Kumar,
         /Date of Hearing
        /Date of
     Pronouncement                       :24.09.2015



     This appeal has been filed by the assessee against the order
of learned Commissioner of Income-Tax (Appeals)-6, Mumbai,
dated   12.02.2013    for   A.Y.    2009-10   passed   against   the
assessment order u/s.143(3) dated 29.12.2011.
I TA N o . 2 2 2 4 / M u m / 1 3 A . Y . 0 9 - 1 0 [ M / s . D i l i g e n t I n v e s t m e n t L t d . v s . I T O ]   Page 2

2.          Following grounds raised by the assessee along with the
appeal memo:

            "The appellant objects to the assessment order dated 12-02-2013
            passed by the Commissioner of Income Tax (Appeal) - 6 and The Ld.
            CIT (A) erred in upholding the Assessing Officer's Order on the
            following grounds :-

            1.          That the Ld. Commissioner of Income Tax (Appeal) erred in
                        considering the Compensation received as Income from House
                        Property in place of Income from Business and not allowing the
                        expenses incurred on running and maintenance of the premises
                        of Rs. 47,37,333/- and Depreciation of Rs. 22,85,645/-.

            2.          That the Ld. Commissioner of Income Tax (Appeal) erred in
                        adding Rs.5,67,880 u/s14A of IT Act read with Rule 8D.

            3.         Each one of the above grounds of appeals is without prejudice
                       to the other.

            4.         The appellant reserves the right to amend, alter or add to the
                       above grounds of appeal."

3.          Ground no.1 is not pressed by the assessee and is

4.          In ground no.2, the assessee has challenged the action of ld.
CIT(A) in confirming the addition of Rs.5,67,880/- made by the
Assessing Officer u/s.14A of Income Tax Act, 1961 r.w. Rule 8D.

5.          During the course of assessment proceeding, it was noted
by the Assessing Officer that assessee company had shown
income of Rs.72,727/- from dividend which does not form part of
total income.                      Accordingly, the Assessing Officer gave notice to
the assessee for making disallowance u/s.14A with respect to the
expenditure incurred on earning this income. In response, the
assessee submitted that the assessee company is engaged in the
I TA N o . 2 2 2 4 / M u m / 1 3 A . Y . 0 9 - 1 0 [ M / s . D i l i g e n t I n v e s t m e n t L t d . v s . I T O ]    Page 3

business of share trading, financing, bill discounting and
maintenance of properties. The dividend earned by the assessee
company is out of investment made from its own funds and the
company has not paid any expenses for the same and therefore,
there            was          no         reason               for        making                 disallowance                   u/s.14A.
Alternatively, it was submitted by the assessee that at most
Rs.7,500/-                   as         proportionate                      expenses                  (0.5%               of   the   total
expenditure) can be considered as an amount to be disallowed
u/s.14A.                   But the Assessing Officer did not agree with the
submissions of the assessee and a sum of Rs.5,67,880/- was
disallowed being 0.5% of the average investment, applying Rule

6.          The assessee carried the matter before the CIT(A). But, ld.
CIT(A) also did not accept the submissions of the assessee and
disallowance made by the Assessing Officer was confirmed.

7.          Before us, ld. Counsel has submitted that no expenses have
been incurred by the assessee on earning of this dividend
income.                He has made alternative prayer that if at all some
disallowance was to be made, it could not have exceeded the
amount of dividend income earned by the assessee during the
year under consideration of Rs.72,727/-.                                                                   In support of his
argument, he has relied upon latest judgment of Hon'ble Delhi
High Court in the case of Chem Invest Ltd. vs. CIT [2015] 61 118 (Delhi) (order dated 02.09.2015), for the
proposition that no disallowance can be made u/s.14A if no
income has been earned or received by the assessee during the
I TA N o . 2 2 2 4 / M u m / 1 3 A . Y . 0 9 - 1 0 [ M / s . D i l i g e n t I n v e s t m e n t L t d . v s . I T O ]   Page 4

8.          Ld. Counsel has placed further reliance upon the following
            1.          CIT vs. Deepak Mittal (P&H HC) 361 ITR 131
            2.          DCIT vs. Subramanya Construction & Development Co. Ltd.
                        (ITA No. 404 of 2013) (Banglore ITAT)
            3.          Daga Global Chemicals P. Ltd. vs. ACIT (ITA No. 5592 of 2012)
                        (Mum ITAT)
            4.          Chudgar Ranchodlal Jethalal Trade Pvt. Ltd. vs. DCIT (ITA
                        No.245/Ahd/2013) (Ahmedabad ITAT)
            5.          Joint Investment P. Ltd. vs. CIT (Delhi HC) (ITA No.117 of 2015)
            6.          ACIT vs. M. Baskaran (Chennai ITAT) (ITA No.1717 of 2013)
            7.          CIT vs. Delite Enterprise (Bombay HC) (ITA No.110 of 2009)

Ld. Counsel has submitted the copies of judgments and have
read relevant para of these judgments in support of his

9.          On the other hand, ld. D.R. has supported the order of
lower authorities and requested for upholding the disallowance
made by the Assessing Officer.

10.         We have gone through the arguments made by both the
sides and the material placed before us. It is noted that Hon'ble
Delhi High Court in case of Chem Invest Ltd. (supra) vide order
dated 02.09.2015, has analyzed this issue in detail. It has been
held by Hon'ble High Court that there can be no disallowance
u/s.14A unless the income is received by the assessee. It has
been further noted by us from the facts of this case that no
borrowed funds have been used by the assessee for making
investment in shares.                                        It is further noted by us that no
satisfaction has been recorded by the Assessing Officer in the
I TA N o . 2 2 2 4 / M u m / 1 3 A . Y . 0 9 - 1 0 [ M / s . D i l i g e n t I n v e s t m e n t L t d . v s . I T O ]   Page 5

assessment order that assessee has incurred expenditure on
earning exempt income which are more than the amount of
disallowance offered by the assessee. Thus, keeping in mind the
totality of the facts and circumstances of the case, in our
considered view the disallowance made u/s.14A is restricted to
the amount of income of Rs.72,727/- received by the assessee
during the year under consideration. In holding so, we take help
from the decision of Daga Global Chemicals Pvt. Ltd. (supra).
Thus, the assessee gets part relief to this extent.

11.         Thus, the appeal of the assessee is allowed partly.

            Pronounced in the open Court on this the 24th day of
September, 2015.

           Sd/-                                                                                    Sd/-
(SHAILENDRA KUMAR YADAV)                                                                    (ASHWANI TANEJA)
    JUDICIAL MEMBER                                                                        ACCOUNTANT MEMBER
Mumbai: Dated 24/09/2015
                                                            True Copy

                       / Copy of Order Forwarded to:-
1.   / Revenue
2.  / Assessee
3.      / Concerned CIT
4.   -  / CIT (A)
5.    ,     ,         /
   DR, ITAT, Mumbai
6.   / Guard file.
                                                                                                                         By order/   ,

                                                                                                                         / ,
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