2018 (6) TMI 293 - AT - Income Tax

Disallowance u/s 14A - non identification of expenses - Held that - Identical issue has been decided by ITAT, Delhi, A-Bench, in the case of same assessee for A.Y. 2009-2010 2017 (11) TMI 1545 - ITAT DELHI as held AO has not even identified any specific item of expense he merely says that explanation of assessee is not correct as huge investment is made. There is no satisfaction of terms of s. 14A read with Rule 8D. Assessee is right in submitting that disallowance is also against the principle of consistency in the absence of any facts. - Decided in favour of assessee

Summary

Issues:
1. Disallowance of expenses related to exempt income under section 14A of the Income Tax Act.

Analysis:
1. The appeal was against the order of the Ld. CIT(A) for the A.Y. 2010-2011, challenging the disallowance of expenses related to exempt income under section 14A of the Income Tax Act. The assessee had made investments for earning dividend income, which was exempt from tax. The Assessing Officer disallowed ?10,15,931 under section 14A, which the assessee contested.

2. The assessee argued that there was no specific or substantial expenditure incurred for earning the exempt income. The assessee contended that the investment activity did not involve incurring significant expenses directly related to the exempt income. The ITAT Delhi, A-Bench, had previously ruled in favor of the assessee for A.Y. 2009-2010, where it was established that no expenditure directly attributable to exempt income was found. The Tribunal noted that there was no satisfaction under section 14A read with Rule 8D, and the disallowance was made without proper basis or justification.

3. The ITAT referred to various cases, including HT Media Limited v PCIT, CIT v Taikisha Engineering India Ltd., Priya Exhibitors (P.) Ltd. v., and Eicher Motors Ltd. v CIT, to emphasize the importance of proper satisfaction and objective basis for invoking section 14A. The Tribunal held that the Assessing Officer had not identified any specific item of expense related to exempt income and had failed to record proper satisfaction as required by law.

4. The ITAT, considering the precedents and the lack of proper satisfaction by the Assessing Officer, ruled in favor of the assessee, setting aside the orders of the authorities below and deleting the addition of ?10,15,931. The appeal of the assessee was allowed based on the findings and decisions of the ITAT in the case of the same assessee for the A.Y. 2009-2010.

Conclusion:
The ITAT Delhi allowed the appeal of the assessee, overturning the order of the Ld. CIT(A) and deleting the addition of expenses related to exempt income under section 14A of the Income Tax Act for the A.Y. 2010-2011, based on the lack of proper satisfaction and the findings from previous judgments in favor of the assessee.