V.V.V.R. SATHIYAM,VIRUDHUNAGAR vs. DCIT, CENTRAL CIRCLE-1, MADURAI

Aforesaid appeal by assessee for Assessment Year (AY) 2010-11 arises out of the order of learned Commissioner of Income Tax (Appeals)-19, Chennai [CIT(A)] dated 13-08-2019 in the matter of 2 - assessment framed by Ld. Assessing Officer [AO] u/s 143(3) r.w.s. 254 of the Act on 31-12-2018.

The Ld. AR submitted that the only issue is disallowance u/s 14A which may be restricted to the extent of exempt income earned by the assessee. The Ld. DR supported the orders of lower authorities.

The material facts are that the assessee was assessed u/s 143(3) which was subjected to revision u/s 263. In an order u/s 143(3) r.w.s. 263, the assessee was saddled with disallowance u/s 14A for Rs.12.98 Lacs. Upon further appeal, Ld. CIT(A) restricted the disallowance to Rs.0.73 Lacs, being exempt income earned by the assessee. Upon further appeal, Tribunal directed Ld. AO to render findings as to whether the assessee had actually incurred any expenditure during the year. Pursuant to the same, Ld. AO passed an order on 31-12-2018 wherein the disallowance has again been computed at Rs.12.99 Lacs as per Rule 8D. The same is interest disallowance u/r 8D(2)(ii) for Rs.1.58 Lacs and indirect expense disallowance u/r 8D(2)(iii) for Rs. 11.41 Lacs. The stand of Ld. AO, upon confirmation by Ld. CIT(A), is in further appeal before us.

It is undisputed fact that the assessee has earned exempt income of Rs.73,062/- only against which it has been saddled with unjustified disallowance of Rs.12.99 Lacs. It is settled law that the amount of disallowance would not exceed the exempt income earned by the assessee. Concurring with the submissions of Ld. AR, we direct Ld. AO to restrict the disallowance to Rs.73,062/-. The balance disallowance stand deleted.

The appeal stand partly allowed.