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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
आदेश /O R D E R
PER VIKRAM SINGH YADAV, ACCOUNTANT MEMBER:
This is an appeal filed by the Revenue against the order of CIT(A), Salem-7, dated 18.01.2018 wherein the Revenue is aggrieved with the action of ld.CIT(A) in restricting the disallowance made by the ld.Assessing Officer u/s.14A of the Act to the extent of exempt dividend
C.O No.69/Chny/2018 income claimed by the assessee. The assessee in its Cross Objections has supported the order of ld.CIT(A).
Briefly the facts of the case are that during the year under consideration, the assessee has made an investment amounting to Rs.7,21,35,000/- in M/s.Sree Rengaraj Ispat Industry and an amount of Rs.90,000/- in M/s.South Indian Bank Ltd. It has been contended by the assessee that it has not received any dividend income from M/s.Sree Rengaraj Ispat Industry and only an amount of Rs.22,500/- has been received as dividend income from M/s.South Indian Bank Ltd. However, the Assessing Officer has made a disallowance of interest of Rs.69,55,295/- attributed to the investment, which is not includiable in the taxable income by invoking the provisions of section 14A of the Act read with Rule 8D of Income Tax Rules,1962. On appeal ld.CIT(A) following the decision of the Hon’ble Madras High Court, Madras in TCA No.520 of 2016 in the case of M/s.Redington (India) Ltd., Vs.The Addl.
C.I.T,Chennai has held that the disallowance u/s.14A should be restricted to the amount of exempt income and the relevant finding are contained at Para-6 of his order, which is reproduced as under:-
“6. In view of the above, respectfully following the decision of the Hon’ble Madras High Court in the case of M/s.Redington (India) Ltd., cited (supra) and the disallowance u/s.14A should be restricted to the amount of exempted income. The A.R has submitted that the assessee has received a dividend income (exempted income) of Rs.22,500/- only. Therefore, the disallowance may be restricted to exempted income claimed. However, if an higher amount has been claimed as exempt
C.O No.69/Chny/2018 income in the return of income, the amount may be revised upwards accordingly. Hence, the grounds of appeals are partly allowed.”
During the course of hearing, ld.AR submitted that the matter is squarely covered by the decision of Hon’ble Delhi High Court in the case of Joint Investments Pvt Ltd., Vs.C.I.T in 372 ITR 694(Delhi) wherein it was held as under:-
’9. In the present case, the AO has not firstly disclosed why the appellant/assessee’s claim for attributing Rs.2,97,440/- as a disallowance under Section 14A had to be rejected. Taikisha says that the jurisdiction to proceed further and determine amounts is derived after examination of the accounts and rejection if any of the assessee’s claim or explanation. The second aspect is there appears to have been no scrutiny of the accounts by the AO - an aspect which is completely unnoticed by the CIT (A) and the ITAT. The third, and in the opinion of this court, important anomaly which we cannot be unmindful is that whereas the entire tax exempt income is Rs.8,90,000/-, the disallowance ultimately directed works out to nearly 110% of that sum, i.e., Rs.52,56,197/-. 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’’.
We have heard the rival contentions and perused the material available on record. Respectfully following the decision of the Delhi High Court in the case of Joint Investments Pvt Ltd.,(supra), we hereby
C.O No.69/Chny/2018 confirm the findings of the ld.CIT(A) at para-6 of his order. Hence, the appeal filed by the Revenue is dismissed. 5. The Cross Objections filed by the assessee was not pressed and hence, the same is also dismissed as not pressed. 6. In the result, the appeal filed by the Revenue as well as Cross Objections by the Assessee is dismissed.