2022 (6) TMI 1325 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - HELD THAT - As relying on VISION FINSTOCK LTD 2016 (7) TMI 603 - ITAT AHMEDABAD restrict the disallowance made by the Assessing Officer under Section 14A read with Rule 8D and sustained by the learned CIT(A) to Rs.50,000/- being the exempt income actually earned by the assessee in the year under consideration. In the result, the appeal of the Revenue is dismissed while the appeal of the assessee is partly allowed.

Summary

Issues involved:
Dispute over disallowance under Section 14A of the Income-tax Act, 1961 for Assessment Year 2014-15.

Detailed Analysis:

1. Background and Common Issue:
The appeals involved cross appeals by the assessee and the Revenue against the order of the Commissioner of Income-tax (Appeals) regarding the disallowance of Rs.19,94,51,882 under Section 14A of the Income-tax Act, 1961. The issue was related to the disallowance of expenses incurred in relation to exempt income earned by the assessee.

2. Assessing Officer's Disallowance:
The Assessing Officer disallowed Rs.19,94,51,882 under Section 14A, based on Rule 8D calculations, as the assessee had earned exempt dividend income of Rs.50,000 but did not disallow the related expenses. The disallowance included interest expenditure, office, and administrative expenses.

3. CIT(A) Order and Disallowance Restriction:
The CIT(A) restricted the disallowance to Rs.55,55,000 after considering the arguments presented by the assessee. The disallowance was reduced based on the precedent set by previous decisions and the actual exempt income earned by the assessee.

4. Tribunal's Decision and Precedents:
The Tribunal referred to a similar case from the previous year where the disallowance was restricted to the exempt income earned. Citing relevant judgments, the Tribunal upheld the assessee's contention and restricted the disallowance to Rs.50,000, aligning with the actual exempt income earned by the assessee in the current year.

5. Final Tribunal Decision:
The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal, restricting the disallowance to Rs.50,000. The Cross Objection filed by the assessee was dismissed as not pressed. The decision was based on previous rulings and the specific circumstances of the case.

In conclusion, the Tribunal's decision favored the assessee by restricting the disallowance under Section 14A to the actual exempt income earned, following established legal precedents and specific case circumstances.