ICHARAJ VINIMAY PRIVATE LIMITED,KOLKATA vs. ITO, WARD - 6(4), KOLKATA

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ITA 2049/KOL/2018Status: DisposedITAT Kolkata13 March 2019AY 2013-142 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that Section 14A disallowance cannot be invoked when the assessee has not earned any exempt income. The disallowance should have been restricted to the amount voluntarily offered by the assessee.

What were the facts?

The assessee did not receive any dividend income during the assessment year. However, the Assessing Officer (AO) disallowed an amount of Rs. 6,73,713/- under Section 14A read with Rule 8D, despite the assessee suo motu disallowing Rs. 2,61,793/-.

What were the issues?

Whether disallowance under Section 14A is permissible when no exempt income is earned by the assessee. Whether the AO can enhance a suo motu disallowance made by the assessee.

Which sections of the Income-tax Act were involved?

Section 14A

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Income Tax Appellate Tribunal, “C(SMC

Before: Shri A. T. Varkey, JM]

Hearing: 29.01.2019Pronounced: 13.03.2019

ORDER Per Shri A.T.Varkey, JM This appeal filed by the assessee against the order of Ld. CIT(A)-2, Kolkata dated 11.07.2018 for AY 2013-14.

2.

At the outset itself, the Ld. AR of the assessee brought to our notice that the only issue involved in this appeal, is regarding disallowance made by the AO u/s. 14A of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) read with Rule 8D of the Income-tax Rules, 1962 (hereinafter referred to as the “Rules”). It was brought to our notice that in this assessment year, the assessee was not in receipt of any dividend income. However, it suo moto disallowed an amount of Rs.2,61,793/- u/s. 14A of the Act. However, the AO applied Rule 8D of the Rules and made a disallowance of Rs.6,73,713/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who confirmed the same. Aggrieved the assessee is before us.

3.

Having heard the rival submissions and gone through the facts and circumstances of the case. It is taken note that the assessee has not received any dividend exempt income for this assessment year. Therefore, applying the ratio laid by the Hon’ble Delhi High Court in Icharaj Vinimay Pvt. Ltd., AY:2013-14 CIT Vs. Holcim India Pvt. Ltd. in (Del.) and Cheminvest Ltd. Vs. CIT in 378 ITR 33 (Del.) wherein the Hon’ble High court has held that when there is no exempt income. Received by the assessee then section 14A disallowance cannot be invoked. We note that the assessee has suo moto disallowed an amount of Rs.2,61,793/-, therefore, Ld. CIT(A)/AO erred in mechanically applying Rule 8D r.w.s. 14A of the Act for disallowing expenditure to earn exempt income, when assessee did not earn any exempt income. In the facts as discussed the disallowance ought to have been restricted to this amount of Rs.2,61,793/- which the assessee has suo moto offered to tax and the AO ought not to have applied the Rule 8D of the Rules for calculation of disallowance u/s. 14A read with Rule 8D. Therefore, the addition made by the AO is directed to be deleted.

4.

Ground No. 3 and 4 are general in nature and therefore, no adjudication is required and, hence, the same are dismissed.

5.

In the result, the appeal of assessee is partly allowed.

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