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2016 (2) TMI 505 - HC - Income TaxDisallowance u/s 14A - whether ITAT is justified in law to hold that the disallowance made under section 14A read with Rule 8D cannot exceed the exempt income in the absence of any such restriction being there in the relevant section or rule? - Held that - In the present case when the assessee claimed that it had not made any expenditure on earning exempt income the Assessing Officer in terms of sub section (2) of Section 14A of the Act was required to collect such material evidence to determine expenditure if any incurred by the assessee in relation to earning of exempt income. The income from dividend had been shown at 1, 11, 564/- whereas disallowance under Section 14A read with Rule 8D of the Rules worked out by the Assessing Officer came to 4, 09, 675/-. Thus the Assessing Officer disallowed the entire tax exempt income which is not permissible as per settled position of law. Consequently the Tribunal remitted the matter to the Assessing Officer with a direction to decide the same afresh in accordance with law after affording due and reasonable opportunity of being heard to the assessee The view adopted by the Tribunal being a plausible view based on factual position and the relevant case law on the point does not warrant any interference by this Court. Learned counsel for the appellant-revenue has not been able to show any illegality or perversity in the impugned order. - Decided against revenue.
Issues:
Appeal under Section 260A of the Income Tax Act, 1961 against ITAT order regarding disallowance under section 14A read with Rule 8D for assessment year 2009-10. Analysis: The appeal was filed by the revenue challenging the ITAT order dated 18.6.2015 regarding the disallowance made under section 14A read with Rule 8D for the assessment year 2009-10. The main issue was whether the disallowance could exceed the exempt income without any specific restriction in the relevant section or rule. The assessee, a company engaged in manufacturing and sale of corrugate boxes and sheet, had declared a loss of &8377; 64,455/- for the year. The Assessing Officer disallowed &8377; 4,09,675/- under section 14A of the Act read with Rule 8D due to exempt agricultural and dividend income. The CIT(A) partly allowed the appeal, but the Tribunal set aside the order and remitted the matter to the Assessing Officer for fresh consideration. The Tribunal relied on the decision in CIT vs. Deepak Mittal, which emphasized that disallowance under Section 14A requires evidence of expenditure related to exempted income. In this case, the Assessing Officer disallowed the entire tax exempt income, which was deemed impermissible. The Tribunal directed the Assessing Officer to reevaluate the matter in accordance with law and provide a reasonable opportunity for the assessee to be heard. The Tribunal's decision was based on factual position and relevant case law, and the High Court found no illegality or perversity in the impugned order, leading to the dismissal of the appeal. In conclusion, the High Court dismissed the appeal as no substantial question of law arose from the Tribunal's decision. The Tribunal's view was considered plausible and based on factual and legal considerations, warranting no interference by the Court. The matter was remitted to the Assessing Officer for fresh consideration in line with the legal provisions and principles established in relevant case law.
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