2019 (6) TMI 1113 - AT - Income Tax

Disallowance u/s 14A - disallowance voluntarily made was more than dividend income received- HELD THAT - There is merit in the contentions of the assessee. During the course of hearing the ld AR also submitted that the assessee had received dividend from only one company named M/s Mind Tree Ltd. Further the amount of disallowance made by the assessee ₹ 3023.29 lakhs is more than the dividend amount of ₹ 205.44 lakhs. Hence, we are of the view that the disallowance voluntarily made by the assessee would meet the requirements of sec.14A . Accordingly, we are of the view that further disallowance made by the AO and confirmed by CIT(A) is not warranted in the facts and circumstances of the case. Accordingly we set aside the order passed by ld CIT(A) on this issue and direct the AO to delete further addition made by him u/s 14A - Decided in favour of assessee.

Summary

Issues:
Challenge to the order of CIT(A) confirming the enhancement of disallowance made under section 14A of the Act.

Analysis:
The appellant, engaged in managing hotels and resorts, challenged the decision of the CIT(A) to uphold the enhancement of disallowance made by the AO under section 14A of the Act. The appellant had earned dividend income of ?205.44 lakhs and disallowed ?3023.29 lakhs under section 14A. The AO increased the disallowance under Rule 8D(2)(iii) to ?658.90 lakhs, resulting in an additional disallowance of ?557.39 lakhs. The appellant contended that the disallowance should not exceed the dividend income received during the year. The appellant relied on precedents and argued that the voluntary disallowance already made exceeded the dividend amount, hence no further disallowance was necessary.

The appellant cited a decision by a coordinate bench in a similar case to support their argument. They highlighted that the disallowance voluntarily made was more than the dividend received from a single company. After considering the arguments, the Tribunal agreed with the appellant. It was noted that the disallowance already made by the appellant exceeded the dividend income received, satisfying the requirements of section 14A. Therefore, the Tribunal held that the further disallowance by the AO and confirmed by the CIT(A) was unwarranted in the given circumstances. Consequently, the Tribunal set aside the CIT(A)'s order and directed the AO to delete the additional disallowance made under section 14A of the Act.

In conclusion, the appeal filed by the assessee was allowed, and the order was pronounced in the Open Court on 10th June 2019.