AO can made addition under sec 14A read with rule 8D the dividend received from investment out of surplus fund

IN THE INCOME TAX APPELLATE TRIBUNAL

(DELHI BENCH `A’: NEW DELHI)

BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND

SHRI A.N. PAHUJA, ACCOUNTANT MEMBER

ITA No.1668/Del./2012

(Assessment Year: 2008-09)

Amrita Mouldings Pvt. Ltd.,

129, Jorbagh,

New Delhi.

(PAN/GIR No.AAACA1774A)

(Appellant)

Vs.

DCIT, Circle 1(1),

New Delhi.

 (Respondent)

Assessee by: None

Revenue by: Shri A.K. Singh, Sr.DR

ORDER

PER U.B.S. BEDI, J.M.

This appeal of the assessee is directed against the order passed by the CIT (A)- IV, New Delhi, dated 17.02.2012, relevant to assessment year 2008-09, whereby confirmation of addition of Rs.2,56,019/- on account of estimated expenditure u/s 14A of the I.T. Act, 1961 has been challenged.

2. Assessing Officer made addition of Rs.2,56,019/-, u/s 14A of the I.T. Act, 1961 read with Rule 8D of the I.T. Rules, 1962, against which assessee preferred appeal. The authorized representative of the assessee vide written submission dated 04.10.2011 has argued as under:

“During the year under consideration the appellant received dividend income on surplus funds invested with various mutual funds through Citibank who acted as investment adviser with no cost to the appellant company. The dividends were directly credited to the bank account of the appellant electronically by ECS. No interest was paid by the appellant during the year. As such, the appellant did not incur any expenditure on earning dividend income and section 14A and the I.T. Act, 1961 did not apply.”

3. Ld.CIT(A) while considering the submissions of the assessee and discussing various case laws including that of Godrej & Boyace Mfg. Co. Ltd. vs. DCIT (2010) 43 DTR 171, ITAT, Mumbai, Special Bench in the case of ITO vs. Daga Capital Management Pvt. Ltd. (2009) 117 ITD 169 and Delhi High Court decision in the case of Maxopp Investment Ltd. vs. CIT, I.T.A. No.687/2009 which has confirmed the applicability of Rule 8D w.e.f. 2008-09 as held by Hon’ble Mumbai High Court has concluded to confirm the impugned addition.

4. Still aggrieved, assessee has come up in further appeal and while upholding the addition of Rs.2,56,019/- on account of estimated expenditure u/s 14A of the Act has  further challenged the application of Rule 8D of the I.T. Rules to compute the addition u/s 14A of the I.T. Act, 1961.

5. Despite sending notice of hearing sufficiently in advance, assessee did not choose to be present at the time when case was called up for hearing. Therefore, we proceeded to decide the appeal on the basis of material available on record and after considering the arguments of Ld.DR, who strongly supported the order of CIT(A) and pleaded that Rule 8D of the I.T. Rules, is applicable from the assessment year 2008-09 as held by Bombay High Court which view has been confirmed by Delhi High Court in the case of Maxopp Investment Ltd. (supra) and since disallowance has been worked out on the basis of Rule 8D after considering the decision of Maxopp Investment Ltd. vs. CIT (supra) , therefore order of the CIT(A) needs further confirmation.

6. We have heard Ld.DR, considered the material on record and find that latest decision of Hon’ble Jurisdictional High court in the case of Maxopp Investment Ltd. vs. C.I.T., New Delhi (203 Taxman 364) has come which has duly been considered by CIT(A) while upholding the order of the Assessing Officer. Since neither any contrary material has been placed on record nor any higher court’s order is filed with appeal papers, therefore, we do not find any ground to interfere in the impugned order, which is upheld and appeal of assessee is dismissed.

7. As a result, the appeal filed by the assessee gets dismissed.

Order pronounced in open court on 12.06.2012.

                                                          Sd/-                                     Sd/-

                                               (A.N. PAHUJA)                 (U.B.S. BEDI)

                                      ACCOUNTANT MEMBER  JUDICIAL MEMBER

Dated: June 12, 2012

SKB

Copy of the order forwarded to:-

1. Appellant

2. Respondent

3. CIT

4. CIT (A)-IV, New Delhi.

5. CIT (ITAT) Deputy Registrar, ITAT