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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, NEW DELHI
Before: SH.BHAVNESH SAINI
PER BHAVNESH SAINI, JUDICIAL MEMBER
This appeal by the Revenue has been directed against the order of Ld.CIT(A)-4, New Delhi dated 27.09.2017 for AY 2013-14, challenging the deletion of disallowance u/s 14A of Rs.2,63,55,878/-
Ld.CIT(A) in his findings summarized the contention of the assessee that the AO did not consider the suo moto disallowance made by the assessee of Rs.5,61,464/- which is higher than the actually earned dividend income of Rs.5,13,581/-. Ld.CIT(A) further noted that during assessment year under appeal, the assessee has earned dividend income of Rs.5,13,581/- and suo moto disallowed Rs.5,61,464/- while computing the taxable income but the AO did not accept the same and further disallowed Rs.2,63,55,878/- by applying Rule 8D of the Income Tax Rules, 1962. Ld.CIT(A) relied upon the decision of the Hon’ble Delhi High Court in the case of Joint Investment Pvt. Ltd. vs CIT 59 taxmann.com 295 (Del) in which it was held that “disallowance cannot exceed the amount of exempt income earned.” In this decision, it has been held as under:-
“By no stretch of imagination can section 14A or Rule 8d be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in section 14A, and is only to the extent of disallowing expenditure ‘incurred by the assessee in relation to the tax exempt income”. This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case.”
Ld.CIT(A) further noted that Hon’ble Delhi High Court in the case of Pr.
CIT vs IL & FS Energy Development Company Ltd. (2017) 84 Taxmann.com 186 (Delhi) held that Circular No.5 of 2005 dated 11.02.2014 cannot over-ride the expressed provisions of section 14A r.w. Rule 8D. Ld.CIT(A), therefore, held that the assessee has suo moto disallowed Rs.5,61,464/- against the earned exempt income of Rs.5,13,581/-. Therefore, disallowance made by the AO is wholly unjustified. The addition was accordingly deleted.
After considering rival submissions, I do not find any merit in the departmental appeal. Ld. DR relied upon the order of the AO and also relied upon the order of the ITAT, Delhi Bench in the case of Technopark Advisors Pvt. Ltd. vs ACIT in vide order dated 09.01.2012 the matter in issue i.e. disallowance u/s 14A have been restored to the file of the AO. This decision will not support the case of the Revenue. The issue is covered by the judgement of the Hon’ble Delhi High Court in the case of Joint Investment Pvt. Ltd. vs CIT (supra) in which it was held that disallowance cannot exceed the amount of exempt income earned. In the present case, the assessee has suo moto disallowed a sum of Rs.5,61,464/- against the earned exempted income of Rs.5,13,581/-. Therefore, Ld.CIT(A) correctly directed the AO to restrict the disallowance u/s 14A to Rs.5,61,464/-. The Departmental appeal has no merit, the same is, accordingly, dismissed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court.