2019 (4) TMI 688 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - disallowance cannot exceed the exempt income itself - HELD THAT - The issue raised in the present appeal is squarely covered by the judgment of the Hon ble High Court of Delhi in DCIT Vs. Joint Investment Pvt. Ltd. 2015 (3) TMI 155 - DELHI HIGH COURT Applying the said ratio to the facts of the present case, we direct the Assessing Officer to restrict disallowance under section 14A of the Act to the extent of exempt income only - Decided partly in favour of assessee.

Summary

Issues involved:
- Disallowance made under section 14A of the Income-tax Act, 1961
- Whether disallowance under section 14A should be restricted to the amount of tax-exempt income

Analysis:
1. The judgment pertains to two appeals filed by the assessee against a consolidated order of CIT(A)-2, Kolhapur, for assessment years 2013-14 and 2014-15 under section 143(3) of the Income-tax Act, 1961.

2. The issue raised in the appeals is regarding the disallowance made under section 14A of the Act. The assessee challenged the disallowance made under section 14A read with Rule 8D of the Income Tax Rules, 1962, and contended that the disallowance should be restricted to the amount of tax-exempt income under section 14A.

3. The Authorized Representative for the assessee argued that the disallowance made by the CIT(A) exceeded the exempt income for both assessment years. The exempt income for 2013-14 was ?80,676, and the disallowance was ?2,30,000. For 2014-15, the exempt income was ?84,105, and the disallowance was ?2,29,560.

4. The Departmental Representative for the Revenue relied on the orders of the lower authorities. However, the Tribunal found that the issue raised was covered by a judgment of the Hon’ble High Court of Delhi in DCIT Vs. Joint Investment Pvt. Ltd. The Tribunal directed the Assessing Officer to restrict the disallowance under section 14A to the extent of exempt income only.

5. Consequently, the Tribunal partly allowed the appeal by restricting the disallowance to the amount of exempt income. The first ground of appeal raised by the assessee was dismissed, while the second ground was partly allowed.

6. The Tribunal noted that the facts and issues in both appeals were identical, and the decision in one appeal would apply to the other. Therefore, both appeals of the assessee were partly allowed based on the above analysis.

7. The judgment was pronounced on January 25, 2019, by the members of the tribunal, Ms. Sushma Chowla, JM, and Shri Anil Chaturvedi, AM.