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2018 (5) TMI 941 - AT - Income TaxAssessment u/s 153A - Disallowance u/s 14A - Held that - We find that the A.Y. 2009-10 falls in the category of completed assessments . It is an admitted position that no incriminating material was found during the course of search concerning the disallowance u/s 14A of the Act. In that view of the matter, the assessment cannot embrace any fresh disallowance otherwise than supported by any incriminating material found during the course of search. In such a situation, the originally determined income has to be repeated in the assessment u/s 153A of the Act. As there is no mention of any disallowance having been made in the original assessment u/s 143(3) of the Act in any of the orders of the authorities below, we hold that the disallowance to be deleted. Disallowance u/s 14A - Held that - Only where the assessee offers some disallowance u/s 14A with which the Assessing Officer is not satisfied, that he needs to record a proper satisfaction before proceeding to make disallowance u/s 14A. If, on the other hand, the assessee does not offer any disallowance u/s 14A, the requirement of recording satisfaction by the Assessing Officer will be dispensed with. The facts of our case are covered by the mandate in this case inasmuch as the assessee had not offered any disallowance u/s 14A of the Act. In view of the fact that the Assessing Officer properly recorded satisfaction u/s 14A of the Act, despite there being no such requirement as laid down by the Hon ble Supreme Court in the case of Maxopp Investments Ltd. 2018 (3) TMI 805 - SUPREME COURT OF INDIA , we are convinced that the ld. AR s contention on this aspect deserves to be jettisoned. We order accordingly. Disallowance u/s 14A gets restricted to the extent of exempt income, even if the provisions of the section are attracted. In view of the above precedents, which are squarely applicable to the facts of the instant case, we limit the disallowance to the extent of exempt income of ₹ 7,72,918/-. The impugned order is modified pro tanto.
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act. 2. Grant of credit for tax payments. 3. Grant of MAT credit under Section 115JA. 4. Charging of interest under Section 234A. Detailed Analysis: Assessment Year 2009-10 Issue 1: Disallowance under Section 14A The first issue concerns the confirmation of a disallowance of ?89,19,576 made by the Assessing Officer (AO) under Section 14A of the Income Tax Act. The AO noted that the assessee earned exempt dividend income of ?7,77,882 but did not offer any disallowance under Section 14A. Applying Rule 8D, the AO computed the disallowance at ?89,19,576, which was confirmed by the CIT(A). The assessee argued that no incriminating material was found during the search to justify the disallowance under Section 14A, relying on the judgment in Kabul Chawla vs. CIT (2016) 380 ITR 573 (Del). The Tribunal found that the assessment for the year 2009-10 was completed and no incriminating material was found during the search. Consequently, the disallowance made by the AO was deleted. Issue 2: Grant of Credit for Tax Payments The assessee raised additional grounds regarding the grant of credit of ?1,87,538 against ?18,65,739, the non-grant of MAT credit of ?1,49,377 under Section 115JA, and the charging of interest under Section 234A. The CIT(A) did not address these additional grounds. The Tribunal remitted the matter back to the CIT(A) for consideration and decision on these additional grounds. Assessment Year 2010-11 Issue 1: Disallowance under Section 14A The AO noticed that the assessee earned exempt income of ?7,72,918 but did not offer any disallowance under Section 14A. The AO made a disallowance of ?58,90,988, which was reduced by the CIT(A) to ?33,12,360. The assessee contended that the AO did not record any satisfaction before making the disallowance, relying on the judgment in HT Media vs. Pr. CIT (2017) 399 ITR 576 (Del). The Tribunal found that the AO recorded proper satisfaction as required under Section 14A. However, following the precedents set by the Delhi High Court in Cheminvest Ltd. vs. CIT (2015) 378 ITR 33 (Del) and CIT vs. Holcim India P. Ltd. (2014) 90CCH 081-Del-HC, the Tribunal limited the disallowance to the extent of the exempt income of ?7,72,918. Issue 2: Grant of Credit for Tax Payments The assessee raised an additional ground regarding the grant of credit of ?20,24,335 against ?54,20,331. The Tribunal directed the CIT(A) to decide this ground on merits. Assessment Year 2011-12 Issue: Disallowance under Section 14A The only issue in this appeal was the confirmation of disallowance under Section 14A to the tune of ?37,02,740. The facts and circumstances were similar to those of the assessment year 2010-11. The Tribunal rejected the assessee’s contention of non-recording of satisfaction by the AO but reduced the disallowance to ?2,48,500, being the amount of exempt income under Section 10(34) of the Act. Conclusion In conclusion, the Tribunal allowed the appeals partly for all three assessment years. The disallowances under Section 14A were either deleted or reduced to the extent of the exempt income. The additional grounds regarding the grant of credit for tax payments and MAT credit were remitted back to the CIT(A) for consideration and decision on merits.
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