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Facts
The assessee had suo moto disallowed Rs. 61,993 under Section 14A read with Rule 8D. The Assessing Officer, relying on CBDT Circular No.5/2014, made a higher disallowance by considering all expenditures related to investments, not just those yielding exempt income. This addition was confirmed by the Ld. CIT(A).
Held
The Tribunal noted that the issue of disallowance under Section 14A read with Rule 8D is covered by the Jurisdictional High Court's decision in Shalimar Pellet Feeds Ltd., which held that disallowance should only consider investments that have yielded exempt income. Following this precedent, the Assessing Officer is directed to recompute the disallowance accordingly.
Key Issues
Whether disallowance under Section 14A read with Rule 8D should be limited only to investments that have yielded exempt income.
Sections Cited
14A
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Income Tax Appellate Tribunal, “SMC” BENCH KOLKATA
Before: SHRI GEORGE MATHAN
O R D E R This is an appeal filed by the assessee against the order dated 21.05.2025 passed by the ld. Addl/JCIT(A)-1, Visakhapatnam for the assessment year 2017-2018.
Shri Akkal Dudhewala, ld.AR appeared on behalf of the assessee and Shri Somnath Das Biswas, ld. Sr. DR appeared on behalf of the revenue.
It was the submission of the ld.AR that the only issue in the assessee’s appeal was against the action of the ld.CIT(A) in confirming the addition made by the Assessing Officer by invoking provisions of Section 14A read with rule 8D. It was the submission that the assessee had in its return suo moto disallowed an amount of Rs.61,993/- under Section 14A r.w.rule 8D. The Assessing Officer relied upon the Circular issued by the CBDT in Circular No.5/2014 to hold that it was not only the investment which has yielded the exempt income but all the expenditure are to be considered for disallowance u/s.14A of the Act read with rule 8D. It was the submission that the issue is squarely covered by the decision of the Hon’ble Jurisdictional High Court in the case of Shalimar Pellet Feeds Ltd., reported in [2023] 453 ITR 547 (Cal), wherein the Hon’ble Jurisdictional High Court has categorically held that for the purpose of computing the disallowance u/s.14A r.w.rule 8D only such investments are to be considered which have yielded the exempt income. It was the submission that the addition as made by the Assessing Officer and as confirmed by the ld. CIT(A) is liable to be deleted.
In reply, ld.Sr. DR vehemently supported the orders of the ld.AO and ld. CIT(A).
I have considered the rival submissions. As it is noticed that the issue in regard to the disallowance u/s.14A of the Act read with rule 8D, on the issue before me, is now squarely covered by the decision of the Hon’ble Jurisdictional High Court in the case of Shalimar Pellet Feeds Ltd., referred to supra, therefore, respectfully following the decision of the Hon’ble Jurisdictional High Court, the Assessing Officer is directed to recompute the disallowance by considering the only such investment which has yielded the exempt income.