MADRAS SECURITY PRINTERS (P) LTD.,CHENNAI vs. ACIT, CHENNAI

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ITA 2584/CHNY/2019Status: DisposedITAT Chennai28 November 2019AY 2016-173 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the disallowance under Section 14A should be restricted to the extent of the exempt income earned by the assessee. This decision was based on the precedent set by the Delhi High Court.

What were the facts?

The assessee, engaged in manufacturing and exporting security forms, faced a disallowance of Rs. 8,67,057 under Section 14A read with Rule 8D for the assessment year 2016-17. The assessee had earned only Rs. 10,200 as exempt income.

What were the issues?

The primary issue was whether the disallowance of expenses relatable to exempt income should exceed the amount of exempt income itself.

Which sections of the Income-tax Act were involved?

Section 14A

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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI

Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN

Hearing: 25.11.2019Pronounced: 28.11.2019

PAN: AAGCM 0599K (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/ Appellant by : Shri G. Baskar, Advocate ��यथ� क� ओर से /Respondent by : Shri AR.V. Sreenivasan, JCIT सुनवाई क� तार�ख/Date of Hearing : 25.11.2019 घोषणा क� तार�ख /Date of Pronouncement : 28.11.2019 आदेश / O R D E R PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER:

The assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-8, Chennai in dated 25.07.2019 for the assessment year 2016-17.

2.

M/s. Madras Security Printers Pvt. Ltd., is engaged in the business of manufacturing and exporting security forms, computer forms, postal envelops, labels, plastic and smart cards. While making the assessment for the assessment year 2016-17, the Assessing Officer invoked the jurisdiction U/s.14A r.w.r. 8D and made disallowance of Rs.8,67,057/- under Rule 8D(ii) & (iii), respectively. Aggrieved against that order, 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.

3.

The ld.AR pleaded that the assessee earned an exempt income of Rs.10,200/- only, on which the ld.AO made a disallowance of Rs.8,67,057/- which has been upheld by the ld.CIT(A). It was pleaded that the disallowance be restricted to the extent of dividend income earned by the assessee. Per contra, the ld.DR supported the orders of the lower authorities.

4.

We heard the rival submissions and find merit in the assessee’s claim that the restriction of disallowance be restricted to the extent of dividend income as held by the Hon’ble Delhi High Court in the case of M/s. Joint Investments (P.) Ltd. vs. CIT (2015) 372 ITR 694 (Delhi). Therefore, we direct the Assessing Officer to restrict the disallowance to the extent of exempt income, in accordance with the above decision.

5.

In the result, the assessee’s appeal is treated as partly allowed for statistical purposes.

Order pronounced in the Court on 28th November, 2019 in Chennai.

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