MANEKCHAND PANCHAND TRADING INVESTMENT COMPANY PVT LTD.,MUMBAI vs. DCIT 5 (2)(2), MUMBAI

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ITA 4645/MUM/2019Status: DisposedITAT Mumbai19 January 2021AY 2014-153 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the disallowance under Section 14A cannot exceed the exempt income earned by the assessee. The Assessing Officer was directed to restrict the disallowance accordingly.

What were the facts?

The Assessing Officer disallowed Rs. 4,34,417/- under Section 14A read with Rule 8D. The assessee received exempt income of Rs. 59,573/- and argued that the disallowance should not exceed this amount.

What were the issues?

Whether the disallowance under Section 14A can exceed the amount of exempt income earned by the assessee.

Which sections of the Income-tax Act were involved?

Section 14A

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Income Tax Appellate Tribunal, VIRTUAL COURT

Before: SHRI C.N. PRASAD, HONBLE & ITA.NO. 4645/MUM/2019 (A.Y: 2014-15) Shri Sanjay J. Sethi

For Appellant: Ms. Shefali Garg
For Respondent: Shri Sanjay J. Sethi
Hearing: 19.01.2021Pronounced: 19.01.2021

O R D E R PER C.N. PRASAD (JM)

1.

This appeal is filed by the assessee against the order of the Ld. Commissioner of Income-tax (Appeals)-10, Mumbai [hereinafter for short "Ld. CIT(A)] dated 10.05.2019 for the A.Y. 2014-15 in confirming the action of the Assessing Officer in disallowing ₹.4,34,417/- u/s. 14A of the Act.

2 ITA.NO. 4645/MUM/2019 (A.Y: 2014-15) Manekchand Panachand Trading Investment Company Pvt. Ltd., 2. Briefly stated the facts are, the Assessing Officer while completing the assessment computed the disallowance u/s. 14A r.w. Rule 8D of I.T. Rules and made disallowance of interest under Rule 8D(2)(ii) and expenses being 0.5% of average investments under Rule 8D(2)(iii) of I.T. Rules. Ld.CIT(A) sustained the action of the Assessing Officer. Against this order assessee is in appeal before us in confirming the disallowance made u/s. 14A of the Act.

3.

Ld. Counsel for the assessee submits that during the Assessment Year under consideration assessee received exempt income of ₹.59,573/- and the Assessing Officer has made disallowance of ₹.4,34,417/- u/s. 14A r.w. Rule 8D of I.T. Rules. Learned Counsel for the assessee submitted that the disallowance u/s. 14A r.w. Rule 8D cannot exceed exempt income and therefore direction be given to Assessing Officer accordingly. Ld. Counsel for the assessee relied on the decision of the Hon'ble Supreme Court in the case of PCIT v. State Bank of Patiala (99 taxmann.com 286) wherein it was held that disallowance u/s. 14A of the Act cannot exceed exempt income.

4.

Ld.DR vehemently supported the orders of the Authorities below.

3 ITA.NO. 4645/MUM/2019 (A.Y: 2014-15) Manekchand Panachand Trading Investment Company Pvt. Ltd., 5. Heard both sides, perused the orders of the authorities below. In view of the decision of the Hon'ble Supreme Court in the case of PCIT v. State Bank of Patiala (supra), I hold that the disallowance u/s. 14A shall not exceed the exempt income, accordingly the Assessing Officer is directed to restrict the disallowance u/s. 14A to the exempt income received by the assessee during the year under appeal.

6.

In the result, appeal of the assessee is partly allowed.

Order pronounced in the virtual court on 19.01.2021.

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