2021 (11) TMI 1081 - AT - Income Tax

Disallowance u/s 14A r.w.r 8D - assessee earned exempt dividend income and offer suo-moto disallowance while computing the income - CIT(A) deleted the additional disallowance by observing that AO was duty bound to record his dissatisfaction about the computation of disallowance made by the assessee - HELD THAT - We find that besides the observation of Ld. CIT(A) in the impugned order, the disallowance is not sustainable for two reasons. Firstly, the suo-moto disallowance as offered by the assessee was more than the exempt income. Secondly, as per settled legal position, only those investments were to be considered which had actually yielded any exempt income during the year. The suo-moto disallowance offered by the assessee was in accordance with law. Therefore, finding no reason to interfere in the impugned order on this issue, we dismiss the ground raised by the revenue. Disallowance u/s 43B (Employer s contribution to Gratuity Fund) - Disallowance u/s. 43B(b) as per the observation of Tax Auditor that there was non-payment of Employer s contribution to approved Gratuity Fund - CIT(A) deleted the same by observing that the same was already disallowed by the assessee in the computation of income and further disallowance would amount to double addition - we direct Ld. AO to verify the observation and delete the disallowance. This ground stand allowed for statistical purpose.

Summary

Issues:
1. Condonation of delay in filing the appeal by the revenue.
2. Disallowance under section 14A for Rs.16.73 Crores.
3. Disallowance under section 43B for non-payment of Employer's contribution to gratuity fund.

Analysis:

Issue 1: Condonation of Delay
The appeal by the revenue for Assessment Year 2013-14 was delayed by 214 days, seeking condonation based on a petition due to authorization delays attributed to the Covid-19 pandemic in 2020. The tribunal, considering the circumstances, condoned the delay and admitted the appeal for adjudication on merits.

Issue 2: Disallowance under Section 14A
The assessment involved disallowance under section 14A for Rs.16.73 Crores, including an additional disallowance of Rs.16.37 Crores by the Assessing Officer (AO). The AO considered all investments for disallowance, whereas the assessee had already offered a suo-moto disallowance of Rs.35.18 Lacs. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the additional disallowance, emphasizing the AO's duty to express dissatisfaction with the assessee's computation. The tribunal upheld the CIT(A)'s decision, noting that the suo-moto disallowance exceeded the exempt income and only investments yielding exempt income should be considered. Therefore, the tribunal dismissed the revenue's appeal on this issue.

Issue 3: Disallowance under Section 43B
The disallowance under section 43B(b) for non-payment of Employer's contribution to the gratuity fund was made by the AO based on the Tax Auditor's observation. However, the CIT(A) deleted this disallowance, stating that it was already accounted for by the assessee in the income computation. The tribunal directed the AO to verify this observation and delete the disallowance, allowing this ground for statistical purposes.

In conclusion, the appeal was partly allowed for statistical purposes, with the tribunal dismissing the revenue's appeal on the disallowance under section 14A and directing the AO to delete the disallowance under section 43B for non-payment of Employer's contribution to the gratuity fund.