2021 (5) TMI 940 - AT - Income Tax

Disallowance u/s 37(1) - HELD THAT - While dealing with the issue, the Tribunal in 2019 (6) TMI 1621 - ITAT MUMBAI having found that in assessee s own case for assessment year 2012-13, the Tribunal has deleted similar addition made by assessing officer, followed the same and upheld the decision of learned Commissioner of Income-tax (Appeals) in deleting the additional disallowance made by the assessing officer. Facts being identical, respectfully following the aforesaid decision of the Tribunal in assessee s own case, we uphold the order of learned Commissioner of Income-tax (Appeals) on the issue. Ground raised is dismissed. Disallowance u/s 14A - HELD THAT - Having considered rival contentions, we find from materials on record that in the year under dispute, the assessee had not actually earned any exempt income. That being the case, the question of disallowance under section 14A r.w.r.8D would not arise. In fact, while considering identical issue in assessee s own case in assessment year 2014-15 2019 (6) TMI 1621 - ITAT MUMBAI the Tribunal in the order referred to above, deleted the disallowance made by the assessing officer in absence of any exempt income earned during the year. In view of the aforesaid, we uphold the decision of learned Commissioner of Income-tax (Appeals) by dismissing the ground.

Summary

Issues:
1. Deletion of disallowance under section 37(1) of the Act.
2. Deletion of disallowance under section 14A of the Income-tax Act, 1961.

Issue 1: Deletion of disallowance under section 37(1) of the Act:
The appeal by the revenue challenged the deletion of disallowance of &8377; 1,73,95,853/- under section 37(1) of the Act for the assessment year 2013-14. The assessing officer observed that the expenditure claimed by the assessee was not sanctioned by law and hence disallowed it. The assessee, a shipping agency house in India, had filed its return of income showing a loss and had debited certain expenditure not sanctioned by law. The assessing officer disallowed the balance amount after the assessee voluntarily disallowed a portion of it. The Commissioner of Income-tax (Appeals) deleted the disallowance, citing a decision in favor of the assessee in a previous assessment year. The Tribunal upheld the Commissioner's decision, noting that the issue was identical to a previous case where a similar addition was deleted, thereby dismissing the revenue's appeal.

Issue 2: Deletion of disallowance under section 14A of the Income-tax Act, 1961:
The revenue challenged the deletion of disallowance of &8377; 13,54,609/- under section 14A of the Income-tax Act, 1961. The Tribunal noted that in the year under dispute, the assessee had not earned any exempt income, making the disallowance under section 14A r.w.r.8D unnecessary. Referring to a previous case where a similar disallowance was deleted due to the absence of exempt income, the Tribunal upheld the decision of the Commissioner of Income-tax (Appeals) to dismiss the ground raised by the revenue. Consequently, the appeal was dismissed, and the decision was pronounced on 05/05/2021.

This judgment highlights the importance of consistency in decisions across different assessment years and the significance of exempt income in determining disallowances under the Income-tax Act. The Tribunal's reliance on previous decisions and the absence of exempt income in the year under consideration played crucial roles in upholding the decisions of the Commissioner of Income-tax (Appeals) and dismissing the revenue's appeal in both issues.