JCIT, BANGALORE vs. PRIYARAJ ELECTRONICS LTD., BANGALORE

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ITA 867/BANG/2016Status: DisposedITAT Bangalore27 October 2017AY 2009-104 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the disallowance under Section 14A cannot exceed the amount of exempt income earned. As the CIT(A)'s order was in line with this settled legal position, the Tribunal found no reason to interfere.

What were the facts?

The assessee company revised its income tax return declaring a loss. The Assessing Officer completed the assessment at a higher total income, disallowing borrowed funds not used for business. The assessee appealed the addition under Section 14A, arguing disallowance should not exceed exempt income.

What were the issues?

Whether the disallowance under Section 14A can exceed the exempt income earned by the assessee.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH, BENGALURU

Before: SHRI VIJAY PAL RAO & SHRI INTURI RAMA RAO

For Appellant: Shri B.R.Ramesh, Joint CIT(DR)
For Respondent: Shri S.Ganesh, Advocate
Hearing: 24/08/2017Pronounced: 27/10/2017

This is an appeal filed by the revenue directed against the order of the Commissioner of Income-tax (Appeals)-12, Bengaluru, dated 12/02/2016 for the assessment year 2009-10.

2.

The revenue raised the following grounds of appeal:

2. Briefly facts of the case are as under: The respondent-assessee is a company duly incorporated under the provisions of the Companies Act, 1956. Return of income for the assessment year 2009-10 was filed on 24/09/2009. Subsequently this return of income was revised on 24/11/2010 declaring loss of Rs.17,72,377/-. After processing the said return of income under the provisions of section 143(1) of the Income- tax Act, 1961 [hereinafter referred to as 'the Act' for short] the case was selected for scrutiny and assessment was completed u/s 143(3) vide order dated 15/12/2001 at total income of Rs.75,75,611/-. While doing so, the Assessing Officer (AO) disallowed a sum of Rs.51,31,970/- on the ground that borrowed funds were not used for business purpose and this disallowance was agreed to by the assessee.

3.

Being aggrieved by the assessment order, an appeal was preferred before the CIT(A) challenging addition u/s 14A on the ground that the AO should not resort to disallowance u/s 14A without giving a finding as to correctness or otherwise of the claim of the assessee that no expenditure was incurred to earn exempt income. It was further contended that in Page 3 of 4 any event, amount of disallowance should not exceed exempt income as in the current year, exempt income is only Rs.3,380/- and disallowance should be limited to only exempt income. The CIT(A), after considering the submissions of the respondent-assessee held as follows:

4.

Being aggrieved by the order of the CIT(A) restricting the disallowance u/s 14A to the extent of exempt income earned of Rs.3,380/- the revenue is in appeal before us. The learned Departmental Representative vehemently contended that the CIT(A) was not justified in restricting disallowance to the extent of exempt income shown.

5.

We heard rival submissions and perused the material on record. Now law is settled that, disallowance u/s 14A cannot exceed the exempt income. Since the order of the CIT(A) is in consonance with settled

Page 4 of 4 proposition of law, we do not find any reason to interfere with the order of the CIT(A).

6.

In the result, the appeal filed by the revenue is dismissed.

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