2020 (1) TMI 1468 - AT - Income Tax

Disallowance u/s 14A - HELD THAT - As noticed that assessee has made investment in shares and received dividend amounting to ₹ 50,000/- which is exempt from tax and not includible in the total income of the assessee for the year under consideration. Against the said addition, assessee preferred first statutory appeal before the ld. CIT(A) who confirmed the action of the ld. A.O. Thereafter assessee preferred second statutory appeal before the Tribunal. As we can see, assessee total dividend income is ₹ 50,000/- so there cannot be disallowance of Rs. more than 50,000/- Respectfully following the above quoted judgment, we allow the appeal of the assessee.

Summary

Issues:
1. Disallowance of administrative expenditure under section 14A r.w. Rule 8D(2)(iii) of the Act.
2. Charging of interest u/s 234A, 234B, 234C, and 234D.

Analysis:

Issue 1: Disallowance of administrative expenditure under section 14A r.w. Rule 8D(2)(iii) of the Act:
The case involved cross-appeals by the Assessee and the Revenue against the order of the Ld. CIT(A)-1, Ahmedabad. The Assessee contested the disallowance of ?57,72,000 as 1% of administrative expenditure incurred under section 14A r.w. Rule 8D(2)(iii) of the Act. The Assessee argued that no such disallowance was warranted as the exempt income was only ?50,000. The Assessing Officer had made an addition of ?17,02,77,850 based on the investment in shares and dividend income received. The Assessee's contention was supported by a previous judgment of the High Court which held that disallowance under section 14A cannot exceed the exempt income itself. The Tribunal allowed the Assessee's appeal, citing that the total dividend income was ?50,000, and therefore, disallowance exceeding this amount was not justified.

Issue 2: Charging of interest u/s 234A, 234B, 234C, and 234D:
The Assessee also challenged the charging of interest u/s 234A, 234B, 234C, and 234D by the Assessing Officer. The Assessee denied the liability to pay interest, arguing that its exempt income did not exceed ?50,000 as evidenced by its books of accounts. The Tribunal, after reviewing the relevant record and impugned order, noted that the case was similar to a previous judgment of the High Court where the disallowance under section 14A was restricted to the exempt income earned. Following the precedent, the Tribunal allowed the Assessee's appeal and dismissed the Revenue's appeal, thereby deleting the addition made by the authorities.

In conclusion, the appeal filed by the Assessee was allowed, and the appeal filed by the Revenue was dismissed, based on the findings related to the disallowance of administrative expenditure and the charging of interest under sections 234A, 234B, 234C, and 234D.

Order pronounced in Open Court on 30-01-2020.