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Facts
The assessee received Rs. 66,810/- as exempt income, comprising share in partnership profit and dividend income. The assessee suo motu disallowed Rs. 8,44,669/- under Section 14A, which was increased to Rs. 1,35,74,360/- by the AO and confirmed by the CIT(A).
Held
The Tribunal held that disallowance under Section 14A cannot exceed the exempt income claimed. Since the exempt income was Rs. 66,810/- and the disallowance was significantly higher, the disallowance made by the Assessing Officer could not be sustained.
Key Issues
Whether the disallowance of expenses under Section 14A could exceed the exempt income earned by the assessee.
Sections Cited
14A, 10, R.W.R. 8D
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Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI
Before: Shri Kul BharatDr. B. R. R. Kumar
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order of ld. CIT(A)-36, New Delhi dated 18.10.2019.
The only issue raised before us pertains to disallowance of expenses u/s 14A of the Income Tax Act, 1961. During the year, the assessee received total amount of Rs.66,810/- in respect of which exemption was claimed u/s 10 of the Income Tax Act, 1961. The amount consists of Rs.51,228/- on account of share in profit in the partnership firm, an amount of Rs.15,582/- on account of dividend income from mutual fund. The assessee has suo motu made disallowance of Rs.8,44,669/- u/s 14A r.w.r. 8D. The Assessing Officer has increased the disallowance to Rs.1,35,74,360/- which the ld. CIT(A) confirmed. Aggrieved, the LT Foods Ltd. assessee filed appeal before us. The facts are not in dispute. By this time, it is settled position that the disallowance u/s 14A of the Act cannot exceed exempt income claimed. Since, in the instant case, the exempt income claimed by the assessee was Rs.66,810/- and the disallowance already made were to the tune of Rs.8,44,699/-, respectfully placing reliance on the judgment of Hon’ble High Court in the case of Joint Investment Pvt. Ltd. Vs. CIT (372 ITR 694) wherein the appeal filed by the Revenue was also dismissed in SLP No. 23650 of 2018 and CIT Vs. Caraf Builders (Del-HC), we hold that disallowance made by the Assessing Officer cannot be sustained.
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 03/01/2024.