Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH ‘F’ : NEW DELHI
Before: SHRI O.P. KANT & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER :
Appellant, ITO, Ward 20 (2), New Delhi (hereinafter referred to as the ‘assessee’) by filing the present appeal sought to set aside the impugned order dated 21.04.2017 passed by the Commissioner of Income - tax (Appeals)-7, New Delhi qua the assessment year 2013-14 on the ground that :- “On the facts and under the circumstances of the case, the Ld. CIT (A) has erred in law in deleting the addition of Rs.2,21,57,375/- made by the AO u/s 14A of the Income Tax Act, 1961 without appreciating the fact that the AO after recording his satisfaction under the provisions of section 14A, had after recording his satisfaction under the provision of section 14A had correctly computed the disallowance under the Rule 8D of the Income Tax Rules.”
Briefly stated the facts necessary for adjudication of the issue at hand are : the assessee is into the business of providing consultancy relating to investment, acquiring, holding procuring, purchasing all types of securities. Assessing Officer (AO), by invoking the provisions contained under section 14A of the Income-tax Act, 1961 (for short ‘the Act’) read with Rule 8D of the Income-tax Rules, 1962 (for short ‘the Rules’), proceeded to make disallowance of Rs.2,21,57,375/- on the ground that throughout the year, assessee had own funds under the share capital and reserve & surplus to the tune of Rs.397/- crores whereas made investment during the year under assessment to the tune of Rs.400 crores leading to the conclusion that remaining investment of Rs.2.28 crores has been made from the borrowed funds bearing interest cost and thereby assessed the total income at Rs.2,32,64,940/-.
Assessee carried the matter by way of an appeal before the ld. CIT (A) who has restricted the disallowance made by the AO u/s 14A of the Act to Rs.1,70,151/- i.e. to the extent of dividend income claimed as exempt income by partly allowing the appeal. Feeling aggrieved, the Revenue has come up before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
Undisputedly, assessee company has received/claimed exempt dividend income to the tune of Rs.1,70,151/- during the year under assessment. It is also not in dispute that the assessee company has made suo moto disallowance of Rs.1,69,625/- u/s 14A of the Act. It is also not in dispute that during the year under assessment, the assessee company has owned share capital and reserve & surplus to the tune of Rs.397 crores as against the investment of Rs.400 crores.
In the light of the aforesaid facts, ld. CIT (A) proceeded to restrict the disallowance u/s 14A to Rs.1,70,151/- by returning following findings :-
“3.4 The facts are similar in the present appeal and I do not see any reason to deviate the principle followed by the CIT(Appeals), whereby disallowance made was deleted. Admittedly, the appellant has disclosed dividend income of Rs.1 ,70,051/- during the year, which is claimed as exempt. However, disallowance computed is far and excess of the exempt income claimed. The Hon'ble Delhi High Court in the case of Joint Investment (P) Ltd. vs. CIT 2015/(3) TMI 155 has held that disallowance u/s 14A cannot exceed the exempt income. The Hon'ble Delhi Bench of the ITAT in the case of MIs Ganga Kaveri Credit & Holding (P) Ltd. vs. ACIT, Circle 12(1), New Delhi in is also held that disallowance u/s 14A cannot exceed the amount of dividend income. Respectfully following the decisions cited above and the order of the Ld. CIT(Appeals) quoted in para 3.3, the disallowance u/s 14A is restricted to RS.1 ,70,1511- i.e. to the extent of dividend income claimed as exempt. The AO is directed to delete the balance disallowance. This ground of appeal is ruled partly in favour of the appellant.”
7. Perusal of the impugned order passed by the ld. CIT (A) goes to prove that there is no illegality or perversity in the findings returned by the ld. CIT (A) as it is settled principle of law that disallowance u/s 14A cannot exceed the exempt income earned by the assessee. Hon’ble Delhi High Court in the case of Joint Investments Pvt. Ltd. vs. CIT – (2015) 372 ITR 694 (Del.) held that, “the disallowance more than exempt income earned by the assessee during the year under assessment cannot be made.” Consequently, the appeal filed by the Revenue is hereby dismissed. Order pronounced in open court on this 20th day of February, 2020.