2021 (10) TMI 279 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - HELD THAT - The investment in the shares has been pleaded by the assessee at ₹ 32,000/- in this year. Though it is not verifiable from the findings of any of the authorities below, but, considering the pleadings of the assessee that it has no taxable income, we allow this ground of appeal and delete the disallowance. This because in Assessment Year 2014-15, the assessee has exempt income whereas the AO has worked out the disallowance i.e. more than the exempt income. This aspect gives us guidance that the Assessing Officer has not considered the figure; he simply proceeded with the formula of Rule 8D i.e. 0.5% of the total investment. He disallowed taking a lead from there. We, therefore, find force in the ground of appeal raised by the assessee and the statement of facts made therein. Therefore, the Ground No.2 3 of the appeal are allowed. Disallowance of travelling expenses - Expenditures were incurred in Assessment year 2012-13 - as crystallized in that year. Therefore, according to the Revenue Authorities, it should have been claimed in the earlier year - assessee has pleaded that since there is a same rate of taxes; therefore, this expenditure should be allowed in this year also - HELD THAT - No force in this contention of the assessee; because if that be so, then it will be at the sweet will of the assessee to declare the quantum of income in any assessment year. The assessee may show higher income in a particular year and lower income in another year. It has to be adhered to the accounting principles as contemplated u/s 145. Addition u/s 14A r.w.r. 8D - HELD THAT - The expenditure is to be disallowed relatable to earning of exempt income. So, it cannot be assumed that ₹ 2,21,640/- could be incurred for earning tax-free income of ₹ 1,81,315/-. This is an erroneous approach at the end of the Assessing Officer more particularly in view of the judgment in the case of CIT vs. Corrtech Energy Pvt Ltd, 2014 (3) TMI 856 - GUJARAT HIGH COURT - The assessee has disallowed itself on administrative expenses. To our mind, that is also on the lower side looking to the average of investments considered by the Assessing Officer Disallowance of employees contribution of provident fund - assessee has contended that though this amount was paid after due date provided in the PF Act, but it was paid prior to the due date of filing of the return - HELD THAT - Explanation did not meet the approval of Hon ble High Court of Gujarat as reported in the case of CIT Vs. GSRTC 2014 (1) TMI 502 - GUJARAT HIGH COURT - First Appellate Authority has followed this decision and, to our mind, learned First Appellate Authority has not committed any error in upholding the disallowance. Accordingly, this ground of appeal of the assessee is rejected.

Summary

Issues:
1. Appeal against orders of CIT(A) for Assessment Years 2013-14 and 2014-15.
2. Ex-parte proceedings due to non-appearance of assessee.
3. Disallowance of administrative expenses and travelling expenses.
4. Disallowance under Section 14A of the Income-tax Act.
5. Disallowance of employees' contribution to provident fund.

Analysis:

1. The appeals were filed against orders of CIT(A) for the Assessment Years 2013-14 and 2014-15. The assessee did not appear for multiple scheduled hearings, leading to ex-parte proceedings. The Tribunal proceeded to decide the appeals on merit due to the non-appearance of the assessee.

2. In the appeal for Assessment Year 2013-14, the assessee challenged the ex-parte order by CIT(A). The Tribunal upheld the decision of CIT(A) as the assessee failed to present its case adequately before the authorities.

3. The assessee raised grounds regarding the disallowance of administrative expenses related to investments in partnership firms and shares. The Assessing Officer relied on Section 14A and Rule 8D to calculate the disallowance. However, the Tribunal found that the Assessing Officer's approach was flawed, and the disallowance was reduced based on the meager exempt income of the assessee.

4. Additionally, the disallowance of travelling expenses was contested by the assessee. The Tribunal upheld the Revenue Authorities' decision, emphasizing adherence to accounting principles and the true income assessable in a specific year.

5. For the Assessment Year 2014-15, similar issues arose, including non-appearance of the assessee leading to ex-parte proceedings and challenges to disallowances under Section 14A. The Tribunal adjusted the disallowances based on the facts and circumstances of each case, limiting the disallowances to align with the exempt income earned.

6. The disallowance of employees' contribution to provident fund was also disputed. The Tribunal upheld the disallowance, following the decision of the Hon'ble High Court of Gujarat, emphasizing adherence to statutory provisions.

In conclusion, the Tribunal partly allowed both appeals, adjusting the disallowances and upholding decisions based on legal provisions and factual considerations.