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PER MAHAVIR SINGH, VICE-PRESIDENT; 1. This appeal by assessee is arising out of the order of Commissioner of Income Tax (Appeals)-52, Mumbai [for short ‘the ld. CIT(A)] in Appeal No. CIT(A)-52/IT-198/DCIT-CC-4(2)/17-18 order dated 26.03.2019. Assessment was framed by DCIT, Central Circle-4(2), Mumbai for the Assessment Year 2015-16 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’) vide his order dated 12.10.2017. 2. The only issue in this appeal of assessee is against the order of CIT(A) restricting the disallowance suo-moto computed by assessee at Rs. 5,86,52,973/- as against the exempt income earned by assessee at Rs. 13,17,233/-. For this assessee has raised following grounds:
Mum 2019-Chalet Hotels Limited
On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) ought to have restricted the disallowance under Section 14A of the Act to the amount of exempt earned during the year under consideration i.e. Rs. 13,17,233/-, although the appellant has suo moto disallowed. Rs. 5,86,52,973/- in its Return of Income. The appellant hereby prays that on the basis of the findings given by the learned CIT(A) in his order, stating that disallowance under Section 14A cannot exceed dividend income, thus the disallowance under section 14A of the Act must be restricted to Rs 13,17,233/-.
We have heard rival contentions and gone through the facts and circumstances of this case. We noted that that the Assessing Officer while framing assessment has made disallowance by invoking the provisions of section 14A of the Act r.w.r 8D of the Income Tax Rules, 1962 (hereinafter ‘the Rules’). The Assessing Officer made disallowance under Rule 8D(2)(ii) at Rs. 27,15,12,687/- under Rule 8D(2)(iii) at Rs. 2,14,47,136/-. Thereby the total disallowance made was Rs. 29,29,59,823/-.
Aggrieved, assessee preferred appeal before the CIT(A). The CIT(A) deleted the disallowance made by Assessing Officer under Rule 8D(2)(ii) i.e. interest expenditure amounting to Rs. 27,15,12,687/-, but CIT(A) confirmed the disallowance under Rule 8D(2)(iii) being administrative expenses at Rs. 5,86,52,973/- as against the exempt income claimed by assessee at Rs. 13,17,233/-. Before the CIT(A), the assessee claimed that the assessee has earned exempt income only to the extent of Rs. 13,17,233/- and the same may be adopted for making disallowance under Rule 8D(2)(iii) of the Rules. Before the CIT(A), the assessee relied on the decision of Hon’ble Mum 2019-Chalet Hotels Limited Supreme Court in the case of Maxopp Investments Ltd. (91 Taxman.com 154) but CIT(A) noted that the assessee has itself made suo-moto disallowance of Rs. 5,86,52,973/- and the same has to be adopted for this the CIT(A) gave his in para-5.21 as under:
“5.21. In view of the above discussion, the AO is accordingly directed to re-compute the disallowance u/s 14A as explained in paras 5.9 to 5.20 above. However, since, the assessee itself had computed disallowance u/s. 14A of Rs. 5,86,52,973/- which it had added back in the computation of income, the disallowance u/s 14A so re-computed cannot be less than the said amount of Rs. 5,86,52,973/-. Accordingly, this ground of appeal is partly allowed.”
Aggrieved, assessee came in appeal before the Tribunal.
We noted that the short point of dispute is whether the disallowance under Rule 8D(2)(iii) is to be restricted to the extent of exempt income i.e. dividend income earned by assessee at Rs. 13,17,233/- or the disallowance as suo-moto computed by asessee at Rs. 5,86,52,973/-. Here, we have gone through the decision of Hon’ble Supreme Court in the case of Maxopp Investments Ltd. (supra), wherein the Hon’ble Supreme Court has categorically held that the disallowance cannot exceed the exempt income.
Hence, we delete the suo-moto disallowance made by assessee at Rs. 5,86,52,973/- and restricted the disallowance to the extent of exempt income claimed by assessee at Rs. 13,17,233/-. We direct the Assessing Officer accordingly.
In the result, appeal of assessee is allowed. Mum 2019-Chalet Hotels Limited
Order pronounced in the open court on 11th January 2021.