2022 (5) TMI 1327 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - as submitted assessee has not earned any income exempt - HELD THAT - As admitted by the DRP it is clear that the assessee has not earned any income exempt under the tax during the relevant year under consideration. Hence the ratio laid down in the case of Cheminvest Limited 2015 (9) TMI 238 - DELHI HIGH COURT is clearly applicable to the case of the assessee as confirmed by SURESH VERMA 2018 (7) TMI 385 - SC ORDER - thus we are of the considered view that there cannot be a disallowance u/s 14A of the Act when the assessee has not earned any income exempt under the Income-tax Act. We therefore direct the AO to delete the addition made on account of disallowance u/s 14A of the Act r.w.r.8D of the I.T.Rules. This ground is allowed in favour of the assessee. Disallowance on account of deduction claimed u/s 43B towards interest payment - payment is done by the assessee before the due date for filing the return of income u/s.139(1) - HELD THAT - From the reading of the section it is clear that the assessee is entitled to claim deduction in the year in which the actual payment happens provided the said payment is done by the assessee before the due date for filing the return of income u/s.139(1) of the Act. We notice that the assessee has submitted the bank statements in support of the payment made towards interest before the DRP - We also notice that the evidence submitted by the assessee in the form of bank statements has not been properly examined by the lower authorities. Actual payment is the very basis on which deduction u/s.43B is to be allowed and the bank statement substantiating the payments needs to be verified. Hence we remit the issue back to the AO to verify the evidence afresh. Needless to say the assessee should be given a proper opportunity of being heard by the AO. This ground is allowed for statistical purposes.

Summary

Issues:
1. Disallowance u/s 14A r.w.r. 8D - Rs.1,91,49,505
2. Disallowance on account of deduction claimed u/s 43B - Rs.5,66,93,000

Analysis:
1. Disallowance u/s 14A r.w.r. 8D - Rs.1,91,49,505:
- The assessee contended no exempt income was earned during the year, challenging the disallowance made by the AO. The DRP confirmed the disallowance citing expenses related to exempt income. The Tribunal referred to the judgment in Cheminvest Limited v. CIT, where it was held that disallowance u/s 14A is not applicable if no exempt income is received or receivable. The Tribunal directed the AO to delete the disallowance based on the settled principle and binding decisions.

2. Disallowance of deduction u/s 43B - Rs.5,66,93,000:
- The AO disallowed the deduction claimed u/s 43B, stating it was wrongly claimed and lacked supporting details. The DRP upheld the disallowance due to insufficient evidence. The assessee argued for the deduction based on actual payment supported by bank statements. The Tribunal noted the provision of section 43B allowing deduction upon actual payment before the due date. It remitted the issue back to the AO for proper verification of the evidence, emphasizing the need to examine the bank statements for verifying actual payments.

In conclusion, the Tribunal allowed the appeal for statistical purposes, directing the AO to delete the disallowance u/s 14A and review the deduction u/s 43B based on the evidence provided by the assessee.