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2018 (3) TMI 1518 - AT - Income TaxDisallowance u/s. 14A - AO rejected the suo motto disallowance - Held that - CIT(A) has considered the issue in right perspective. The contention of the Assessing Officer that no claim of assessee could be accepted otherwise by way of revised return has also been properly met out by the ld. CIT(A) by relying on various decisions, wherein the findings in Goetze (India) (2006 (3) TMI 75 - SUPREME Court) has been considered, inasmuch as the decision of Hon ble Supreme Court was limited to the power of Assessing Officer and did not impinge to the powers of Tribunal. CIT(A) in this regard has also taken into account CBDT Circular No. 1955 as reproduced in the impugned order, against which there is nothing on record from the side of Revenue. Hon ble Delhi High Court in CIT vs. Sam Global Securities Ltd. 2013 (9) TMI 876 - DELHI HIGH COURT after considering the decision in Goetze India (supra) has decided this issue in favour of the assessee. CIT(A) has also relied on the decision of Hon ble jurisdictional High Court in Joint Investment Pvt. Ltd. vs. CIT 2015 (3) TMI 155 - DELHI HIGH COURT for restricting the addition to the extent of exempt income earned by the assessee. - Decided in against revenue
Issues Involved:
1. Justification of CIT(A) in restricting the disallowance under Section 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962. 2. Consideration of legal principles regarding the allowability of expenditure under Section 14A irrespective of earning exempt income. 3. Validity of the CIT(A)'s order in light of the facts and law. Issue-wise Detailed Analysis: 1. Justification of CIT(A) in Restricting the Disallowance Under Section 14A: The Revenue challenged the CIT(A)'s decision to restrict the disallowance to ?47,91,971 under Section 14A of the Income Tax Act, 1961, read with Rule 8D of the Income Tax Rules, 1962. The original disallowance made by the assessee was ?1,06,41,818, which was later revised to ?23,00,575 during the assessment proceedings. The CIT(A) restricted the disallowance to the extent of the exempt income earned, i.e., ?47,91,971, relying on various judicial pronouncements and the CBDT circular. The Tribunal found no justification to interfere with the CIT(A)'s order, noting that the CIT(A) considered the facts in light of judicial pronouncements and the decision in Goetze India Ltd. vs. CIT, which restricts the power of the Assessing Officer but not the appellate authorities. 2. Consideration of Legal Principles Regarding Allowability of Expenditure: The Revenue argued that the CIT(A) failed to consider the legal principle that the allowability of expenditure under the Act is not conditional upon earning exempt income, citing the Supreme Court's decision in CIT Vs. Rajendra Prasad Moody. However, the Tribunal upheld the CIT(A)'s view, which was supported by the Delhi High Court's judgment in Joint Investment Pvt. Ltd. vs. CIT, stating that disallowance under Section 14A read with Rule 8D cannot exceed the exempt income earned by the assessee. The Tribunal also referred to the CBDT circular emphasizing the duty of the Department to determine the correct taxable income and assist taxpayers in claiming rightful reliefs. 3. Validity of the CIT(A)'s Order: The Tribunal found the CIT(A)'s order to be well-reasoned and supported by judicial precedents. The CIT(A) addressed the Assessing Officer's objection regarding the non-revised return by referring to the Supreme Court's decision in Goetze India Ltd., which limits the power of the Assessing Officer but not the appellate authorities. The CIT(A) also considered the Delhi High Court's judgment in Sam Global Securities Ltd., which supported the assessee's claim. The Tribunal concluded that the CIT(A) correctly restricted the disallowance to the exempt income earned and dismissed the Revenue's appeal. Conclusion: The Tribunal upheld the CIT(A)'s order, which restricted the disallowance under Section 14A to the extent of the exempt income earned by the assessee. The Tribunal found the CIT(A)'s decision to be in line with judicial precedents and the CBDT circular, emphasizing the correct determination of taxable income and the appellate authorities' power to entertain legal claims. The Revenue's appeal was dismissed, affirming the CIT(A)'s reasoned order.
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