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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI V. DURGA RAO, HON’BLE & SHRI MANJUNATHA. G, HON’BLE
PER MANJUNATHA. G, ACCOUNTANT MEMBER:
This appeal filed by the revenue is directed against the order passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 13.04.2023 and pertains to assessment year 2014-15.
At the time of hearing, we find that there is a delay of 75 days in appeal filed by the revenue, for which petition along with :-2-: ITA. No: 926/Chny/2023 affidavit explaining reasons for condoning of delay has been filed. The ld. Sr. AR, Shri. AR V Sreenivasan, Addl. CIT, referring to affidavit filed by the Assessing Officer submitted that due to frequent transfers and posting in the department, the appeal is not filed within stipulated time. In our considered view, reasons given by the appellant to file appeal beyond due date specified under the Act is bonafide and it comes under reasonable cause for condonation of delay. Thus, we condone delay in filing of appeal by the revenue and admit the appeal for hearing.
The revenue has raised the following grounds of appeal: “1. The order of the learned ld. CIT (A) is contrary to law and facts and circumstances of the case.
2. The Id. CIT(A) has erred in restricting the disallowance made u/s 14A to the extent of exempt income.
3. The CIT(A) has erred in not considering the explanation inserted to the sub section 1 of the section 14A which- is clarificatory in nature wherein It has been stated that 14A is applicable even when there is no exempt income and having retrospective effect.
4. The ld.CIT(A) ought to have followed the decision of Hon'ble Karnataka High Court in United Breweries Limited Vs. ACIT (Kar) 229 Taxman l 13 and Hon'ble Bombay High Court in the case Godrej &% Boyce Manufacturing Co. Ltd (Bom.) 328 ITR 81 wherein it was ruled that the AO is duty bound to calculate the disallowance u/s 14A applying Rule SD if the AO is not satisfied with the assessee's claim that no expenditure is incurred for earning exempt income from AY 2008-09.
5. The learned CIT (A) ought to have appreciated that the disallowance u/s 14A does not depend upon the exempted income as Section 14A of the Income Tax Act, 1961 and Rule
:-3-: ITA. No: 926/Chny/2023 8D of the Income Tax Rules, 1962 never link the disallowance with the exempted income earned. The word used in Section is that Expenditure in relation to income not includible in total income" and hence exempted income is not a criterion for disallowance u/s 14A of the IT Act. 6. For these and other grounds that may be adduced at the time of hearing. it is prayed that the order of the Ld. CIT(A) be set aside and that of the Assessing Officer be restored.”
The brief facts of the case are that, the appellant has filed his return of income for the assessment year 2014-15 on 28.11.2014, declaring total income of Rs. 1,35,96,590/-. The assessment has been completed u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) on 31.12.2016 and determined total income of Rs. 2,62,92,104/-. The case has been subsequently, reopened for the reasons recorded and notice u/s. 148 of the Act, dated 11.02.2020 was issued. In response to notice u/s. 148 of the Act, the assessee has filed his return of income on 11.03.2020. The case has been selected for scrutiny and assessment has been completed u/s. 144B r.w.s. 147 of the Act and made additions of Rs. 3,26,652/- u/s. 14A r.w.r. 8D of I.T. Rules, 1962. The assessee has filed appeal against assessment order before the ld. CIT(A). The ld. CIT(A), for the reasons stated in their appellate order dated 13.04.2023, partly allowed appeal filed by the assessee with a direction to Assessing Officer to restrict the disallowance made u/s. 14A r.w.r. 8D of I.T. Rules, 1962 to the extent of exempt income earned by the :-4-: ITA. No: 926/Chny/2023 appellant for the assessment year 2014-15. Aggrieved by the ld. CIT(A) order, the revenue is in appeal before us.
None appeared for the assessee. We have heard the ld. DR, perused the material available on record and gone through orders of the authorities below. The issue of disallowance contemplated u/s. 14A r.w.r. 8D of I.T. Rules, 1962 is no longer res integra. The Hon’ble Jurisdictional High Court of Madras in the case of M/s. Redington India Ltd vs ACIT, [2017] 77 Taxmann.com 257 (Mad), has considered an identical issue and held that disallowance u/s. 14A r.w.r. 8D of I.T. Rules, 1962, should not exceed exempt income earned for the relevant assessment year. In the present case, the ld. CIT(A) has directed the Assessing Officer to restrict disallowance made u/s. 14A r.w.r. 8D of I.T. Rules, 1962 to the extent of exempt income earned by the appellant during assessment year 2014-15. In our considered view, the findings recorded by the ld. CIT(A) is in accordance with the ratio laid down by the Hon’ble Jurisdictional Madras High Court and thus, we are inclined to uphold the findings of the ld. CIT(A) and dismiss appeal filed by the revenue.