GALADA FINANE LTD,CHENNAI vs. DCIT, CORP CIR 2(1), CHENNAI

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ITA 572/CHNY/2019Status: DisposedITAT Chennai10 March 2021AY 2015-164 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision to restrict the disallowances under Section 14A to the extent of exempt income earned, citing Supreme Court judgments. The Tribunal found this to be in accordance with the law.

What were the facts?

The assessee company, engaged in non-banking finance, filed its return for AY 2015-16. The Assessing Officer made additions for disallowances under Section 14A read with Rule 8D. The CIT(A) restricted these disallowances to the extent of exempt income.

What were the issues?

Whether disallowances 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

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI

Before: SHRI MAHAVIR SINGH, VICE- & SHRI G.MANJUNATHA

Hearing: 10.03.2021

PER G.MANJUNATHA, ACCOUNTANT MEMBER: This appeal filed by the assessee is directed against order of the learned CIT(A)-6, Chennai dated 28.11.2018 and pertains to assessment year 2015-16.

2.

The assessee has raised following grounds of appeal:-

1.

“1. The order of the learned CIT(A) is wrong, illegal and is opposed to law. 2. The learned CIT(A) erred in disallowing ` 3,06,935/- u/s. 14A read with Rule 8D of Income Tax Rules, 1962 as per details given in Annexure-I”

3.

Brief facts of the case are that the assessee company is engaged in the business of non-banking finance company filed its return of income for the assessment year 2015-16 on 26.09.2015 declaring total income of Rs 43,47,540/-. The case was taken up for scrutiny and assessment has been completed u/s.143(3) of the Act, on 31.08.2017 and determined total income at `52,12,290/- by making additions towards disallowances u/s.14A r.w.s 8D of Income Tax Rules, 1962 amounting to `8,64,747/-. The Assessing Officer has also recomputed book profit u/s.115JB of the Income Tax Act, 1961 by making additions towards disallowance u/s.14A of the Act.

4.

The assessee carried the matter in appeal before the first appellate authority. Before the learned CIT(A), the assessee requested to restrict disallowances to the extent of exempt income earned for the year. The learned CIT(A), for the detailed reasons recorded in his appellate order dated 28.11.2018 has restricted disallowance computed by the Assessing Officer to the extent of exempt income being `3,06,935/- dividend of by holding that disallowance contemplated u/s.14A cannot exceed exempt income.

Aggrieved by the learned CIT(A) order, the assessee is in appeal before us.

5.

None appeared for the assessee. We have heard the learned DR and perused materials available on record. We find that learned CIT(A) has restricted disallowances computed by the Assessing Officer under Rule 8D(ii) & (iii) of Income Tax Rules, 1962 to the extent of exempt income of ` 3,06,935/- on the basis of request of the assessee in light of decision of the Hon'ble Supreme Court in the case of CIT Vs. Chettinad Logistics Pvt.Ltd. (2017) 80 Taxmann.com 221, where the Hon’ble Supreme Court held that disallowances contemplated u/s.14A of the Act, should not exceed the amount of exempt income earned during the year. A similar view has been expressed by the Hon'ble Supreme Court in the case of PCIT Vs. State Bank of Patiala (2018) 99 taxmann.com 286.

Therefore, we are of the considered view that findings recorded by the learned CIT(A) in light of the decisions of Hon'ble Supreme Court while restricting disallowances to the extent of exempt income is in accordance with law. Hence, we are inclined to uphold findings of the learned CIT(A) and dismiss the appeal filed by the assessee.

6.

In the result, appeal filed by the assessee is dismissed.

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