M.N.RANGAMANI,CHENNAI vs. INCOME TAX OFFICER,CORPORATE WARD-2(1), CHENNAI

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 5, Chennai dated 14.02.2020 relevant to the assessment year 2015-16. The only issue involved in this appeal relates to confirmation of disallowance of ₹.37,15,836/- under section 14A of the Income Tax Act, 1961 [“Act” in short].

The appeal filed by the assessee is delayed by 282 days in filing the appeal before the Tribunal due to outbreak of Covid-19 pandemic. Accordingly, the delay is condoned and admitted the appeal for adjudication.

Brief facts of the case are that the assessee filed his return of income for the assessment year 2015-16 on 30.09.2015 with returned income of ₹3,710/-. The case was selected for complete scrutiny and a notice under section 143(2) of the Act dated 18.07.2016 was served on the assessee. Subsequently, notice under section 142(1) r.w.s. 129 of the Act and letters were issued calling for details. After considering the submissions of the assessee, the Assessing Officer has completed the assessment under section 143(3) of the Act dated 29.12.2017 by making disallowance of ₹.37,15,836/- under section 14A r.w. Rule 8D. On appeal, the ld. CIT(A) confirmed the disallowance.

On being aggrieved, the assessee is in appeal before the Tribunal and submitted that in this case, the assessee has taken investment which yield exempt income for numerator for the purpose of determination of disallowance under section 14A of the Act r.w. Rule 8D and the Assessing Officer has taken wrongly denominator also for the same investment instead of total investment.

On the other hand, the ld. DR relied on the orders of authorities below.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. It is a settled law that for the purpose of computation of disallowance under section 14A r.w. Rule 8D only those investments which yield exempt income for the relevant assessment year has to be considered. In this case, although the Assessing Officer has taken investment which yield exempt income for numerator, but also, considered the same for denominator, instead of total investment as per Rule 8D of the Income Tax Rules, 1962. Therefore, we direct the Assessing Officer to consider the investment which yield exempt income for numerator and total investment for denominator and compute the disallowance in accordance with law after affording reasonable opportunity of being heard to the assessee. Accordingly, we set aside the order passed by the ld. CIT(A) and remit the matter back to the file of the Assessing Officer with a direction to decide the issue afresh and pass order as per the directions given above.

In the result, the appeal filed by the assessee is allowed for statistical purposes.