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2020 (6) TMI 169 - AT - Income TaxAddition u/s.14A - assessee has not claimed any exempted income during the year under consideration- HELD THAT - There is no quarrel that section 14A postulates the disallowance of expenditure incurred for earning the exempt income which is not forming part of the total income of the assessee. It is also clear from the copy of the return filed by the assessee for assessment year 2010-2011 that no claim has been made in respect of dividend income. The formula given in the Rule 8D does not recognize the actual expenditure incurred by the assessee but it calculates the disallowance being 0.5% of the average investment therefore, this computation of disallowance cannot disregard and override the actual expenditure attributable for earning the exempt income. The reliance placed by assessee in the case of Cheminvest Ltd 2015 (9) TMI 238 - DELHI HIGH COURT also support the case of the assessee. Accordingly, we set aside the orders of the authorities below on this issue and delete the disallowance made by the Assessing Officer made by the AO u/s. 14A by applying Rule 8D(2). Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT - Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited 2020 (5) TMI 359 - ITAT MUMBAI .
Issues:
- Disallowance made under section 14A of the Act for the assessment year 2010-2011. - Procedural issue regarding the delayed pronouncement of the order. Analysis: 1. Disallowance under Section 14A: The appeal was against the order of the CIT(A) confirming the addition made under section 14A of the Act by the Assessing Officer. The Assessing Officer disallowed &8377; 10,81,553/- as per sub-rule (2) of Rule 8D of the I.T. Rules for the dividend income earned by the assessee. The assessee contended that no expenditure was incurred for earning the dividend income and no exempt income was claimed. It was argued that the Assessing Officer did not properly establish that the assessee incurred any expenditure for earning the exempt income. The Tribunal noted that the Assessing Officer did not express satisfaction regarding the expenditure incurred for earning the dividend income. The Tribunal emphasized that section 14A requires disallowance of expenditure incurred for earning exempt income. The Tribunal found that the computation under Rule 8D did not consider the actual expenditure incurred by the assessee. Relying on precedents and the case of Cheminvest Ltd, the Tribunal set aside the lower authorities' orders and deleted the disallowance made by the Assessing Officer. 2. Procedural Issue - Delayed Pronouncement of Order: The Tribunal addressed the procedural issue of delayed pronouncement of the order. While the hearing concluded on 7.2.2020, the order was pronounced after the expiry of 90 days. Referring to Rule 34(5) of the Income Tax Appellate Tribunal Rules, the Tribunal acknowledged the requirement to pronounce orders within 90 days. However, considering the extraordinary circumstances such as the nationwide lockdown due to the COVID-19 pandemic, the Tribunal excluded the period of lockdown from the calculation of the 90-day limit. Citing a similar decision by a coordinate Bench in DCIT vs JSW Limited, the Tribunal emphasized the need to factor in ground realities and the pragmatic approach in interpreting the time limit for order pronouncement. Consequently, the Tribunal allowed the appeal of the assessee and pronounced the order on 5/06/2020. This detailed analysis covers the issues of disallowance under section 14A of the Act and the procedural issue of delayed pronouncement of the order, providing a comprehensive understanding of the judgment delivered by the Appellate Tribunal ITAT CUTTACK.
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