2019 (3) TMI 286 - AT - Income Tax

Disallowance u/s 14A - Investments yielding dividend income - HELD THAT - Direct the AO to consider the investments which are giving exempt income for the purpose of computing disallowance under Rule 8D(2)(iii). Accordingly, all these appeals are partly allowed for statistical purposes in view of the above directions. See ACIT vs. Vireet Investments 2017 (6) TMI 1124 - ITAT DELHI

Summary

Issues:
Appeal against CIT(A)'s order confirming disallowance under section 14A of the Income Tax Act related to expenses for exempt income.

Analysis:
The Appellate Tribunal ITAT Mumbai heard appeals from three different assesses challenging the disallowance of expenses related to exempt income under section 14A of the Income Tax Act. The assesses raised common grounds regarding the disallowance made by the Assessing Officer (AO) invoking Rule 8D of the Income Tax Rules. The Tribunal considered the identical facts and circumstances of the cases and directed the AO to compute the disallowance under Rule 8D(2)(iii) by considering only investments yielding exempt income. This direction was based on the Tribunal's decision in a sister concern case and the Special Bench's decision in the case of ACIT vs. Vireet Investments (P.) Ltd. The Tribunal emphasized that only investments yielding dividend income should be considered for disallowance under Rule 8D(2)(iii). The learned Counsel for the assesses argued that the issue was squarely covered by the Tribunal's previous decision in a similar case. The Tribunal allowed the appeals partly for statistical purposes based on the directions given regarding the computation of disallowance related to exempt income.

In conclusion, the Tribunal's judgment addressed the common issue of disallowance under section 14A of the Income Tax Act for expenses related to exempt income. The Tribunal directed the Assessing Officer to consider only investments yielding exempt income while computing the disallowance under Rule 8D(2)(iii). The decision was based on previous rulings and aimed to ensure a fair and consistent approach in determining the disallowance for such expenses.