2021 (5) TMI 295 - AT - Income Tax

Disallowance u/s 14Ar.w.r.8D - Assessee had suo moto made the disallowance - HELD THAT - We find that the exempt income of the assessee was of ₹ 6,300/-. The assessee has suo-moto disallowed the expenses to earn the exempt income in sum of ₹ 2,03,136/-. There are number of decisions of the higher authorities in which it has been specified that the expenses to earn the exempt income should not be more than exempt income. In the present case assessee disallowed the expenses to earn the exempt income to the tune of ₹ 2,03,136/- suo-moto which is more than the exempt income. We also find in support of the decision of Hon‟ble Delhi High Court in the case of Vireet Investment Pvt. Ltd. Vs. CIT . 2017 (6) TMI 1124 - ITAT DELHI in which it is specifically held that the disallowance could not be exceed more than the exempt income. Taking into account all the facts and circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, we decide this issue in favour of the assessee against the revenue. Disallowance of redemption on account of provisions made for redemption of preference shares while computing the books profit u/s 115JB - CIT-A deleted the addition as the assessee never credited the amount of reserves to the profit and loss account and thereafter reduce the reserve used for redemption of preference shares from net profit - HELD THAT - we find that the CIT(A) has allowed the claim of the assessee on the basis of the decision of Hon‟ble ITAT in the assessee‟s own case for the A.Y. 2012-13 2014-15 2018 (6) TMI 1751 - ITAT MUMBAI The CIT(A) has reproduced the finding of the Hon‟ble ITAT on record. There is nothing on record to which it can be assumed that the said order has been changed or varied. The facts are not distinguishable at this stage. Since the issue is fully covered in favour of the assessee in his own case for the A.Y.2012-13 to 2014-15 vide order dated 13.06.2018, therefore, we are of the view that the finding of the CIT(A) is quite justifiable which is not liable to be interfere with at this appellate stage. Accordingly, we decide this issue in favour of the assessee against the revenue.

Summary

Issues:
1. Deletion of addition under section 14A of the Income Tax Act.
2. Deletion of addition on account of provisions made for redemption of preference shares while computing book profit under section 115JB of the Act.

Issue No. 1:
The revenue challenged the deletion of an addition of ?78,73,864 under section 14A of the Income Tax Act. The CIT(A) had deleted the addition based on the assessee's suo moto disallowance of ?2,03,136. The revenue argued that the CIT(A) wrongly deleted the addition. However, the CIT(A) justified the deletion by stating that any expenditure incurred in earning exempt income should be disallowed. The appellate tribunal found that the assessee's disallowed expenses exceeded the exempt income, contrary to judicial precedents. The tribunal referred to a Delhi High Court case to support the limitation on disallowance. Ultimately, the tribunal upheld the CIT(A)'s decision, ruling in favor of the assessee against the revenue.

Issue No. 2:
The revenue contested the deletion of an addition related to provisions made for redemption of preference shares while computing book profit under section 115JB of the Act. The CIT(A) had allowed the claim based on a previous favorable decision by the Hon'ble ITAT. The tribunal reviewed the CIT(A)'s decision and found that the issue had already been decided in the assessee's favor in previous years. Citing the Hon'ble ITAT's order, the tribunal upheld the CIT(A)'s decision, stating that the issue was fully covered in favor of the assessee. Consequently, the tribunal dismissed the revenue's appeal.

In conclusion, the appellate tribunal upheld the CIT(A)'s decisions on both issues, ruling in favor of the assessee and dismissing the revenue's appeal.