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2023 (5) TMI 1169 - AT - Income TaxDisallowance u/s 14A - assessee made suo-moto disallowance u/r 8D(2)(iii) after taking into account only those investments which actually yielded exempt income in calculating amount of average investment - as per CIT-A only those investments on which exempt income has been earned in the year under consideration can only be considered for computation of disallowance under Rule 8D as relying on ACB India Ltd case 2015 (4) TMI 224 - DELHI HIGH COURT - HELD THAT - No error or infirmity in the order of the Ld.CIT(A) and find no justification to interfere with the order of the Ld.CIT(A) . Accordingly, the Ground No. 1 of the Department is dismissed. Disallowance as prior period expenses - AO made the disallowance by relying upon the order passed in the preceding years in the Assessee s own case - CIT(A) had deleted the addition of the preceding years by relying on the decision of the Tribunal in Assessee s own case 2014 (11) TMI 1174 - ITAT DELHI - HELD THAT - No justification to interfere with the order of the Ld.CIT(A). Accordingly, the Ground No. 2 of the Department is dismissed.
Issues:
1. Disallowance under section 14A of the Act 2. Disallowance of prior period expenses Issue 1: Disallowance under section 14A of the Act The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2013-14. The Revenue raised grounds challenging the disallowance under section 14A of the Act and the deletion of disallowance of prior period expenses. The assessee declared a loss, but the assessment order disallowed expenses under section 14A and prior period expenses, resulting in a recomputed total income. The Commissioner (Appeals) allowed the appeal of the assessee by deleting the additions made by the Assessing Officer. The Department appealed against this decision. The key argument revolved around the disallowance under section 14A of the Act. The Revenue contended that the disallowance should be upheld as the assessee received exempt income, necessitating the computation of direct and indirect expenses under Rule 8D. However, the assessee argued that the issue was previously decided in their favor for other assessment years and cited relevant Tribunal orders. The Tribunal found that the assessee made a suo-moto disallowance under Rule 8D(2)(iii) and that the Assessing Officer made additional disallowances under Rule 8D(2)(ii) and (iii), resulting in a total disallowance under section 14A. The Commissioner (Appeals) deleted the disallowance based on the assessee's submissions and previous Tribunal orders, emphasizing consistency in treatment. The Tribunal referred to similar disallowances made in the assessee's own case for other assessment years, which were decided in favor of the assessee by the Tribunal. The Tribunal upheld the Commissioner (Appeals)' decision to delete the disallowance under section 14A, citing consistency and reliance on previous orders. The grounds raised by the Revenue regarding disallowance under section 14A were dismissed. Issue 2: Disallowance of prior period expenses The second issue concerned the disallowance of prior period expenses. The assessee recorded prior period income and expenses, with the net income offered for taxation. The Assessing Officer disallowed the prior period expenses based on preceding years' orders. The Commissioner (Appeals) deleted this addition, relying on the assessee's previous cases and Tribunal decisions in the assessee's favor. The Tribunal noted that the Commissioner (Appeals) had consistently deleted similar additions in the assessee's previous cases, following the principle of consistency. The Tribunal found no justification to interfere with the Commissioner (Appeals)' order regarding the disallowance of prior period expenses. Therefore, the grounds raised by the Revenue on this issue were dismissed. In conclusion, the Tribunal upheld the Commissioner (Appeals)' decision to delete the disallowances under section 14A and prior period expenses, dismissing the appeal filed by the Revenue.
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