2021 (3) TMI 1435 - AT - Income Tax

Disallowance u/s 14A r.w.r.8D - whether no exempt income is earned? - as per CIT(A) assessee has received dividend income from only one company - HELD THAT - It is true that the assessee has earned dividend income which has been claimed as exempt. It is equally true that certain expenses need to be disallowed u/s 14A r.w.r. 8D of the Rules. There is no dispute that the assessee has received dividend income only from one company, namely, Times of Money Ltd - AO should have considered only those investments which yielded exempt income. We find that the directions of the ld. CIT(A) are in consonance with the provisions of the law. We, therefore, do not find any reason to interfere with the same. Disallowances of expenses - HELD THAT - As CIT(A) noticed that similar issues were considered by the Tribunal in assessee s own case in A.Ys 2006-07 to 2008-09 and following the findings of the Tribunal, the ld. CIT(A) deleted the same.DR could not bring any distinguishing decision in favour of the Revenue. We find that the Tribunal 2017 (7) TMI 172 - ITAT DELHI for A.Ys 2006-607 to 2008-09 has deleted the disallowance. Depreciation on software licences @ 25% OR 60% - CIT(A) deleted the disallowance - HELD THAT - CIT(A) found that similar issue was decided by his predecessor in A.Y 2009-10 2022 (5) TMI 1591 - ITAT DELHI in favour of the assessee - Since the deletion has been made following his predecessor, we do not find any error or infirmity in the findings of the ld. CIT(A). Revenue appeal dismissed.

Summary

Issues: Disallowance under section 14A, Disallowance of expenses, Disallowance of depreciation on software licenses

Disallowance under section 14A:
The Revenue appealed against the order of the ld. CIT(A) regarding the disallowance under section 14A of the Income-tax Act, 1961. The Revenue argued that the disallowance should be allowed even if no exempt income is earned, citing circular no. 5/2014. However, the Tribunal found that the Assessing Officer should consider only those investments that yielded exempt income, in line with the provisions of the law. The Tribunal upheld the directions of the ld. CIT(A) in this regard, emphasizing the need for disallowance under section 14A.

Disallowance of expenses:
The Assessing Officer disallowed expenses claimed by the assessee, alleging that they were partly incurred for another business. The ld. CIT(A) deleted this disallowance, citing similar issues considered by the Tribunal in previous years. The Tribunal, following the precedent set by a co-ordinate bench, declined to interfere with the deletion of the disallowance. The Revenue failed to provide any distinguishing decision in their favor, leading to the dismissal of their appeal.

Disallowance of depreciation on software licenses:
The Assessing Officer restricted the depreciation claimed on software licenses to 25% instead of 60%. The ld. CIT(A) deleted this disallowance based on a decision in a previous year in favor of the assessee. The Tribunal, following the precedent set by a co-ordinate bench and the Hon'ble Delhi High Court, upheld the deletion of the disallowance. The appeal filed by the Revenue was ultimately dismissed, and the Tribunal pronounced the order on 30.03.2021.

This judgment provides a detailed analysis of the issues related to disallowances under section 14A, expenses, and depreciation on software licenses, highlighting the importance of following legal provisions and precedent in making such determinations.