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2023 (3) TMI 396 - AT - Income TaxDisallowance of expenditure u/s 14A read with Rule 8D - whether disallowance u/s 14A read with Rule 8D can exceed the quantum of exempt income earned in a particular assessment year? - HELD THAT - As per the settled legal principle in the decisions cited before us, the disallowance u/s 14A read with Rule 8D cannot exceed the quantum of exempt income earned during the year. In view of the aforesaid, we direct the Assessing Officer to restrict the disallowance under Section 14A read with Rule 8D to the exempt income earned during the year. In the result, additional ground is partly allowed. TDS u/s 194C OR 194I - payment towards bus hire charges and wharfage - Disallowance u/s 40(a)(ia) - order passed under section 201(1) and 201(1A) - HELD THAT - Payments made towards bus hire charges and wharfage required deduction of tax at source under section 194C of the Act and accordingly, demand raised under sections 201(1) and 201(1A) cannot be raised. Admittedly, the assessee has deducted tax on both the payments applying the provisions of Section 194C of the Act. Thus, no infirmity in the decision of learned Commissioner (Appeals). Accordingly, ground raised is dismissed. In the result, the appeal is dismissed. Computing book profit u/s 115JB - whether disallowance under section 14A read with Rule 8D can be made - HELD THAT - We are of the view, the issue is no more res integra in view of the decision of the Hon ble Delhi High Court in PCIT Vs. Bhushan Steel Ltd 2015 (9) TMI 1424 - DELHI HIGH COURT and the decision of the Hon ble Special bench of the Tribunal in case of ACIT Vs. Vireet Investments (P.) Ltd. 2017 (6) TMI 1124 - ITAT DELHI wherein, it has been held that while computing book profit under section 115JB of the Act, no adjustment can be made with reference to Section 14A read with Rule 8D. In this view of the matter, we do not find any infirmity in the decision of learned Commissioner (Appeals) on the issue. Accordingly, ground raised is dismissed. In the result, appeal is dismissed.
Issues:
1. Disallowance of expenditure under section 14A read with Rule 8D. 2. Disallowance made under section 40(a)(ia) of the Act. 3. Disallowance under section 14A read with Rule 8D while computing book profit u/s 115JB of the Act. Issue 1: Disallowance of Expenditure under Section 14A read with Rule 8D: The appeals involved a dispute regarding the disallowance of expenditure under section 14A read with Rule 8D. The Assessing Officer computed a significant disallowance amount, which was contested by the assessee. The learned Commissioner (Appeals) deleted the disallowance made by the Assessing Officer, considering that investments generating exempt income were funded by interest-free funds of the assessee. The Tribunal, upon considering legal principles and precedents, directed the Assessing Officer to restrict the disallowance under Section 14A read with Rule 8D to the amount of exempt income earned during the year. Consequently, the additional ground raised by the assessee was partly allowed. Issue 2: Disallowance made under Section 40(a)(ia) of the Act: The revenue challenged the relief granted by the learned Commissioner (Appeals) regarding the disallowance made under Section 40(a)(ia) of the Act. The Assessing Officer had disallowed a proportionate amount under this section due to incorrect tax deduction by the assessee. However, the learned Commissioner (Appeals) disagreed with the Assessing Officer, stating that Section 40(a)(ia) could not be invoked in cases of short deduction of tax. The Tribunal upheld the decision of the learned Commissioner (Appeals) based on previous rulings and factual considerations, dismissing the ground raised by the revenue. Issue 3: Disallowance under Section 14A read with Rule 8D while computing book profit u/s 115JB of the Act: In the appeal related to the computation of book profit under section 115JB of the Act, the revenue questioned whether disallowance under section 14A read with Rule 8D could be made. The Tribunal referred to relevant legal precedents, including decisions by the Hon'ble Delhi High Court and the Special bench of the Tribunal, which clarified that no adjustment could be made with reference to Section 14A read with Rule 8D while computing book profit under section 115JB. Consequently, the Tribunal dismissed the ground raised by the revenue, upholding the decision of the learned Commissioner (Appeals). In conclusion, the Tribunal addressed the various issues raised in the appeals, providing detailed analyses based on legal principles, precedents, and factual considerations. The judgments delivered by the Tribunal clarified the application of relevant provisions and upheld or modified the decisions made by the lower authorities, ensuring a fair and reasoned outcome for all parties involved.
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