PRINCIPAL COMMISSIONER OF INCOME TAX-1 CHD vs. M/S EMPIRE PACKAGE PVT LTD

Whether Reporters of the local papers may be allowed to see the judgment?

To be referred to the Reporters or not? YES

Whether the judgment should be reported in the digest? Present: Ms. Urvashi Dhugga, Advocate for the appellant.

We have heard learned counsel for the appellant-revenue. 4. 2016.02.15 12:23 I attest to the accuracy and integrity of this document High Court Chandigarh of the Act cannot stand. In the present case, when the assessee claimed that it had not made any expenditure on earning exempt income, the Assessing Officer in terms of sub section (2) of Section 14A of the Act was required to collect such material evidence to determine expenditure if any incurred by the assessee in relation to earning of exempt income. The income from dividend had been shown at ` 1,11,564/- whereas disallowance under Section 14A read with Rule 8D of the Rules worked out by the Assessing Officer came to ` 4,09,675/-. Thus, the Assessing Officer disallowed the entire tax exempt income which is not permissible as per settled position of law. Consequently, the Tribunal remitted the matter to the Assessing Officer with a direction to decide the same afresh in accordance with law after affording due and reasonable opportunity of being heard to the assessee. The relevant finding recorded by the Tribunal reads thus:- “7. In the instant case, the income from dividend has been shown at ` 1,11,564/-, the disallowance under section 14A read with Rule 8 D worked out by the Assessing Officer comes to ` 4,09,675/-. Thus, it is clear that the AO has disallowed the entire tax exempt income which is not permissible in view of the judgment of the Hon'ble Delhi High Court referred to above. The Hon'ble Delhi High Court held that the window for disallowance is indicated in section 14A, and is only to the extent of disallowing expenditure “incurred by the assessee in relation to the tax exempt income”. The disallowance under section 14A read with Rule 8D as worked out by the Assessing officer is not in accordance with law and as such working is not sustainable.

In view of the above observations, I think it is appropriate to set aside the order of the learned CIT(A) on this issue and remit the matter to the file of AO with a direction to decide the issue afresh in accordance with law after affording due and reasonable opportunity of being heard to the assessee.” GURBAX SINGH 2016.02.15 12:23 I attest to the accuracy and integrity of this document High Court Chandigarh Additionally, the tax effect involved is of ` 1,26,589/- only.

The view adopted by the Tribunal being a plausible view based on factual position and the relevant case law on the point, does not warrant any interference by this Court. Learned counsel for the appellant-revenue has not been able to show any illegality or perversity in the impugned order. Thus, no substantial question of law arises. Consequently, the appeal stands dismissed. (Ajay Kumar Mittal)