ACIT, CC-26, NEW DELHI vs. ALCHEMIST LIMITED, DELHI

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ITA 36/DEL/2022Status: DisposedITAT Delhi03 January 2023AY 2014-153 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The CIT(A) restricted the disallowance to the extent of exempt income earned, following the jurisdictional High Court's decision. The Tribunal found no substance in the Revenue's appeal against this restriction.

What were the facts?

The Assessing Officer made a disallowance of Rs. 5,51,55,646/- under Section 14A read with Rule 8D. The assessee had earned exempt dividend income of Rs. 20,703/-.

What were the issues?

Whether the disallowance under Section 14A read with Rule 8D can exceed the amount of exempt income earned by the assessee.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, DELHI BENCH ‘A’ : NEW DELHI

Before: SH. PRADIP KUMAR KEDIA & SH. ANUBHAV SHARMA

For Respondent: DR Assessee by None
Hearing: 03.01.2023Pronounced: 03.01.2023

The appeal has been filed by the Revenue against order dated 05.11.2021 in Appeal No. 457/19-20 assessment year 2014-15 passed by Commissioner of Income Tax (appeals)-31, New Delhi (hereinafter referred to as the First Appellate Authority or in short ‘Ld. F.A.A.’) in regard to the appeal before it arising out of assessment order dated 07/02/2019 u/s 153A/143(3) of the Income Tax Act, 1961 passed by ACIT, Central Circle-20, New Delhi (hereinafter referred to as the Assessing Officer or ‘AO’).

36/Del/2022 M/s. Alchemist Ltd. 2 2. Heard and perused the record. Non-appeared for the assessee in spite of notices being issued for today’s hearing. Ld DR was heard who heavily relied findings of Ld. A.O. 3. The short issue involved is summed up in the ground raised before the Tribunal as follows :- “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the disallowance of Rs. 5,51,55,646/- under section 14A r.w.r. 8D to the extent of exempt income earned of Rs. 20,703/- during the year without appreciating facts that the provisions of section 14A nowhere prescribed such restriction.

2. The appellant craves, leave or reserving the right to amend modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.”

3.

It can be observed that Ld. CIT(A) in para 5.4 of its impugned order has decided the issue with following findings :- Vide Ground no. 7 disallowance of Rs.5,51,55,646/- “5.4 u/s 14A has been challenged. In this regard, it is noted that the appellant had earned dividend income of Rs. 20,703/- declaring it as exempt income. The AO made an disallowance of Rs.5,51,55,646/- as per Rule 8D of the Income Tax Rules. In this regard, even though the appellant has not been to demonstrate as to why such disallowance was not warranted, it has been held by the jurisdictional High Court in the case of PCIT Vs Caraf Builders and Constructions Pvt Ltd (2019) 101 taxmann.com 167 (Del), that the disallowance u/s 14A r.w. Rule 8D cannot exceed the exempt income earned during the year. Accordingly, the disallowance u/s 14A is restricted to the exempt income of Rs. 20,703/- earned during the year. Ground no. 7 is partly allowed.”

4.

After taking into consideration the aforesaid observations, there is no substances in the contention of ld. DR as Ld. CIT(A) has only followed the principles of law in favour of assessee relying judgment of Jurisdictional High Court in PCIT vs. Caraf Builders and Constructions Pvt. Ltd. (2019) 101 taxmann.com 167 (Del.), in which Hon’ble Delhi High Court has also 36/Del/2022 M/s. Alchemist Ltd. 3 considered the judgment of Hon’ble Supreme Court of India in Maxopp Investments Ltd. vs. CIT (2018) 402 ITR 640(SC). 5. In the light of aforesaid there is no substances in the ground raised. The appeal of the revenue is dismissed. Order pronounced in the open court on 3rd January, 2023.

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