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ITAT restricted the disallowance to 1% of dividend income
ITAT restricted the disallowance to 1% of dividend income
Gwalior Webbing Co Pvt Ltd earned exempted income dividend from trading and investment in share. AO found that assessee had not claimed any expenditure in connection with exempted income. AO worked out the expenses @0.5% of average value of investment. CIT(A) upheld AO’s order. ITAT held that different ITAT benches considered 1% of dividend income as reasonable disallowance u/s 14A (of Income Tax Act, 1961). It restricted the disallowance to 1% of dividend income. - 500497
1. Gwalior Webbing Co Pvt Ltd was a Non-Banking Financial Corporation (NBFC) and engaged in trading and investment in shares, mutual funds.
2. It earned exempted income dividend of Rs 2 crores out of trading and investment in share.
3. AO found that assessee had not claimed any expenditure in connection with exempted income in his books of account.
4. Assessee submitted that s 14A r.w.s. 8D (of Income Tax Act, 1961) was effective from 24.03.2008 therefore the disallowance was not made.
5. AO disregarded the claim of assessee and worked out the expenses @ .5% of the average value of investment.
6. CIT(A) upheld the order of AO.
On appeal, the ITAT held as under:
7. Prior to the applicability of rule 8D (of Income Tax Rules, 1962), different ITAT benches have considered 1% of dividend income as reasonable disallowance under section 14A (of Income Tax Act, 1961).
8. We are finding from the CIT(A) order that the assessee has offered the disallowance of Rs. 284181.00 which is more than 1% of the exempted income.
9. Therefore we are inclined to restrict the disallowance at the same amount.
Case Reference - Gwalior Webbing Co. Pvt. Ltd. V/s. Income Tax Officer.
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH "B" KOLKATA
Before Shri Mahavir Singh, Judicial Member and
Shri Waseem Ahmed, Accountant Member
ITA No.564/Kol/2013
(Assessment Year :2007-08)
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