CARBON SPECIALITIES LIMITED,GUWAHATI vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2, GUWAHATI

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ITA 26/GTY/2021Status: DisposedITAT Guwahati28 April 2023AY 2009-103 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal found that the actual expenses debited to the profit and loss account were Rs. 3,60,664, and the assessee had already suo motu disallowed Rs. 1,88,417. Therefore, the disallowance should be restricted to the remaining amount.

What were the facts?

The assessee's appeal concerns the disallowance of expenses related to exempt income for AY 2009-10. The AO initially disallowed Rs. 13,01,126, which was reduced to Rs. 8,44,556 by the CIT(A).

What were the issues?

The primary issue is the correctness of the disallowance of expenses incurred for earning exempt income, and whether the disallowance should exceed the actual expenses or the amount of exempt income.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, GUWAHATI BENCH, GUWAHATI

Before: SHRI RAJESH KUMAR & SHRI SONJOY SARMA

For Appellant: Shri S.P. Bhati, FCA
For Respondent: Shri P.S. Thuingaleng, ACIT
Hearing: 27.04.2023

O R D E R

PER RAJESH KUMAR, ACCOUNTANT MEMBER:

1.

The present appeal has been preferred by the assessee against the order dated 28.02.2020 passed by the Ld. Commissioner of Income Tax (Appeals) -2, Guwahati [hereinafter referred to as the CIT(A)] relevant to AY 2009-10.

2.

The only issue raised by the assessee is against the confirmation of disallowance of Rs. 8,44,556/- by ld. CIT(A) as made by the AO u/s 14A of the Act relating to earning of exempt income.

3.

The facts in brief are that this is an appeal against the appellate order passed by the ld. CIT(A) which in turn arises out of the assessment framed u/s 263/144 of the Act. The Commissioner revised and set aside the assessment on the ground that expenses relating to exempt income were not disallowed. In the set aside

Carbon Specialities Limited A.Y. 2009-10 assessment proceeidngs , the ld. AO invoked the provisions of section 14A of the Act and made a disallowance of Rs. 13,01,126/- comprising Rs. 3,60,365/- under Rule 8D(2)(i)& Rs. 9,40,461/- under Rule 8D(iii) in the assessment framed u/s 143(3) r.w.s. 263 of the Act dated 31.03.2015. In the appellate proceeding, ld. CIT(A) partly allowed the relief by sustaining the addition to the tune of Rs. 8,44,556/- by following the decision of Delhi High Court in the case of Pr. CIT vs Moderate Leasing And Capital Services Pvt. Ltd. [ITA 102/2018 dated 31.01.2018] against which SLP filed by the revenue before the Apex Court has been dismissed and disallowance was restricted to the amount of exempt income earned during the year.

After hearing rival submission and perusing the facts on 4. record, we observe that in this case, the assessee has debited to profit and loss account only Rs. 3,60,665/- as is apparent from copy of profit and loss account filed before us. The total expenditure in the profit and loss account is Rs. 23,64,665/- out of which Rs. 20,00,000/- for Municipal Taxes and Rs. 4,000/- for service tax penalty. We observe that municipal tax has been claimed as deduction from the house property income whereas Rs. 4,000/- was added by the AO to the income of the assessee. Therefore, the balance expenses is only Rs. 3,60,664/-. We further note that the assessee has suo moto made disallowance of Rs. 1,88,417/- and, therefore, the disallowance can only be made of Rs. 1,72,247/- which is arrived at after making allowance of suo motto disallowance. Accordingly, we set aside the order of ld. CIT(A) and direct the AO to restrict the disallowance of Rs. 1,72,247/- apart from suo moto disallowance.

Carbon Specialities Limited A.Y. 2009-10

5.

In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open court on 28.04.2023.

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