SHRI ASHOK KUMAR KANODIA,COIMBATORE vs. ACIT NON CORPORATE CIRCLE, COIMBATORE

The assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-2, Coimbatore in dated 23.03.2018 for the assessment year 2014-15.

Shri. Ashok Kumar Kanodia, the assessee, an individual, derives income from salary, house property, business and income from other sources. He is running a factory for manufacturing and sale of LPG stove in the name and style of “Modern Home Appliances”. While making the assessment for assessment year 2014-15, the AO invoked provisions of section 14A r.w.r. 8D and made a disallowance of Rs. 13,25,188/-. Aggrieved, the assessee filed an appeal before the CIT(A). The Ld. CIT(A) dismissed the appeal. Aggrieved against that order, the assessee filed this appeal.

The case was heard through video conferencing. The Ld. AR invited our attention to the copy of statement of income filed in the paperbook and submitted that the assessee received Rs. 241/- as dividend income and claimed the same as an exempt income u/s. 10(34). The AR submitted before the Ld. CIT(A) that the appellant received dividend of Rs. 241/- only as an exempt income and the assessee has not borrowed any money during the year nor made investments which could fetch exempt income. The borrowings already made were meant for the business and hence disallowance u/s. 14A is not required. However, the Ld. CIT(A) without appreciating the facts and circumstances dismissed the appeal. The Ld. CIT(A) failed to appreciate that the disallowance, if any, which could be made u/s. 14A r.w.r. 8D cannot exceed the exempt income. In this regard, the Ld. AR invited our attention to the Jurisdictional High Court decision in the case of Marg Ltd., vs CIT, Chennai

We heard the rival submissions and gone through the relevant materials. It is clear that the assessee earned dividend income of Rs. 241/- and claimed the same as an exempt income. Since, the Hon’ble Jurisdictional High Court has held that the disallowance under Rule 8D read with section 14A can never exceed exempted income earned by assessee during particular assessment year, the disallowance made by the Assessing Officer beyond Rs. 241/- is not sustainable and hence, the AO is directed to restrict the disallowance at Rs. 241/-. The assessee’s appeal is allowed to this extent.

In the result, the assessee’s appeal is partly allowed.