NEELACHAL SALES AND SUPPLIERS (P) LTD.,KOLKATA vs. D.C.I.T.,CIRCLE-12(2), KOLKATA
What did the Tribunal hold?
The Tribunal held that the disallowance under Section 14A read with Rule 8D cannot exceed the actual exempt income earned. Therefore, the disallowance should be restricted to the exempt income of Rs. 5,796/-.
What were the facts?
The assessee, an investment company, claimed exempt income of Rs. 5,796/-. The Assessing Officer disallowed Rs. 1,15,740/- under Section 14A read with Rule 8D for expenses related to earning this exempt income. The CIT(Appeals) confirmed this disallowance.
What were the issues?
Whether the disallowance under Section 14A read with Rule 8D should be restricted to the actual exempt income earned by the assessee.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA
Before: Shri P.M. Jagtap, Vice- & Shri A.T. Varkey
Per Shri P.M. Jagtap, Vice-President:- This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-4, Kolkata dated 21.06.2019 and the solitary issue involved therein relates to the disallowance of Rs.1,15,740/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) under section 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962.
The assessee in the present case is an Investment Company, which filed its return of income for the year under consideration on 30.10.2015 declaring total income at ‘NIL’. In the said return, income received from LLP amounting to Rs.5,796/- was claimed to be exempt by the assessee under section 10(2A) of the Act. The expenditure incurred in relation to Assessment Year: 2015-2016 Neelachal Sales and Suppliers (P) Limited the earning of the said exempt income, however, was not disallowed by the assessee as required by section 14A of the Act. In the assessment completed under section 143(3) vide an order dated 16.11.2017, the Assessing Officer worked out such expenses by applying Rule 8D at Rs.1,15,740/- and made a disallowance to that extent under section 14A of the Act. On appeal, the ld. CIT(Appeals) confirmed the said disallowance. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.
We have heard the arguments of both the sides and also perused the relevant material available on record. The ld. Counsel for the assesese has contended that the exempt income actually earned by the assessee during the year under consideration being only Rs.5,796/-, the disallowance under section 14A as made by the Assessing Officer and confirmed by the ld. CIT(Appeals) is liable to be restricted to Rs.5,796/-. In support of this contention, he, inter alia, has relied on the decision of the Coordinate Bench of this Tribunal rendered in the case of ITO –vs.- M/s. Accord Capital Markets Ltd. vide its order dated 16.03.2018 passed in wherein it was held that the disallowance under section 14A read with Rule 8D cannot exceed the exempt income actually earned by the assessee and the same, therefore, should be restricted to the exempt income earned by the assessee. Respectfully following the said decision of the Coordinate Bench of this Tribunal, we direct the Assessing Officer to restrict the disallowance made under section 14A read with Rule 8D to Rs.5,796/- and allow partly this appeal of the assessee.
In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on November 27, 2019.
Sd/- Sd/- (A.T. Varkey) (P.M. Jagtap) Judicial Member Vice-President) Kolkata, the 27th day of November, 2019 Assessment Year: 2015-2016 Neelachal Sales and Suppliers (P) Limited Copies to : (1) Neelachal Sales and Suppliers (P) Limited, C/o. Subash Agarwal & Associates, Advocates, Siddha Gibson, 1, Gibson Lane, Suite No. 213, 2nd Floor, Kolkata-700069
(2) Deputy Commissioner of Income Tax, Circle-12(2), Kolkata (3) Commissioner of Income Tax(Appeals)-4, Kolkata; (4) Commissioner of Income Tax- ,, Kolkata;
(5) The Departmental Representative
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