OASIS SECURITIES LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 3(2), MUMBAI

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ITA 385/MUM/2018Status: DisposedITAT Mumbai26 March 2019AY 2014-153 pages
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What did the Tribunal hold?

The Tribunal held that disallowance under Section 14A cannot exceed the amount of exempt income. Following the jurisdictional High Court's decision, the AO was directed to restrict the disallowance to Rs. 1,10,679/-.

What were the facts?

The assessee appealed against the CIT(A)'s order which restricted disallowance under Section 14A to Rs. 1,84,880/-. The assessee had claimed that the investment in shares was not for earning tax-exempt income and that the disallowance should not exceed the dividend income of Rs. 1,10,679/-.

What were the issues?

Whether disallowance 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

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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI

Before: SHRI RAJESH KUMAR & SHRI AMARJIT SINGH

For Appellant: Shri Prakash Jothwani, A.R
For Respondent: Shri Abi Rama Kartikeyan, D.R
Hearing: 05.03.2019Pronounced: 26.03.2019

Per Rajesh Kumar, Accountant Member:

1.

The present appeal has been preferred by the assessee against the order dated 15.12.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2014-15.

2.

The grounds of appeal raised by the assessee are as under: “On the facts and in the circumstances of the case and in law.

1. a) The Learned CIT erred in restricting disallowance u/s 14Ar.w. rule 8D(iii) of a sum of Rs.1,84,880/- in place of Rs.1,125/-. b) The Learned CIT(A) erred in not considering that investment made in shares of Azure capital Advisors was not towards earning of Tax exempt income.

2. Without prejudice to the above, the learned CIT(A) erred in not restricting disallowance u/s 14A r.w. Rule 8D to the extent of dividend income being Rs.1,10,679/-.

3. The issue raised by the assessee in ground no.1 is covered against the assessee by the Apex Court order in the case of Maxopp Investment Pvt. Ltd. vs. CIT (2018) 91 taxmann.com 154 (SC) and is accordingly dismissed.

4.

The issue raised in the second ground of appeal is against the order of CIT(A) not restricting the disallowance u/s 14A to the amount of exempt income of Rs.1,10,679/-. This is undisputed that during the year the assessee has exempt income of Rs. 1,10,679/- from shares and mutual funds. The AO applied the provisions of section 14A r.w.s. rule 8D and calculated the disallowance at Rs.11,05,830/- comprising Rs.9,19,820/- under rule 8D(2)(ii) and Rs.1,86,010/- under rule 8D(2)(iii). The ld CIT(A) deleted the disallowance under rule 8D(2)(ii) but sustained the disallowance to the extent of Rs.1,84,880/- under rule 8D(2)(iii).

5. After hearing both the parties and perusing the materials as placed before us, we are of the view that disallowance u/s 14A of the Act can not exceed the amount of exempt income of Rs. 1,10,679/-.The case of the assessee is squarely covered by the decision of the jurisdictional High Court in the case of Pr. CIT Vs Ballarpur Industries Ltd. of 2016 dated 13.10.2016 Nagpur Bench wherein it has been held that disallowance u/s 14A can not exceed the exempt income. Therefore respectfully following the Hon’ble Bombay High Court we direct the AO to restrict the disallowance to Rs. 1,10,679/-. The ground no.2 is allowed.

Order pronounced in the open court on 26.03.2019.

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