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Income Tax Appellate Tribunal, DELHI BENCH “E”: NEW DELHI
Before: SHRI I.C.SUDHIR & SHRI PRASHANT MAHARISHI
PER PRASHANT MAHARISHI, A. M. 1. This appeal is preferred by the assessee against the order of the ld CIT(A)-IX, New Delhi dated 24.06.2014 dismissing the appeal of the assessee confirming the action of the ld Assessing Officer in making an addition of Rs. 420530/- u/s 14A of the Income Tax Act in assessment order dated 26.12.2013 passed u/s 143(3) of the Act. the assessee has raised following two grounds of appeal:-
“1. That the order passed u/s 250(6) is wrong, bad in law and against the facts and circumstances of the case.
2. That the ld CIT(A) and AO has erred in law and on facts I disallowing total administrative expenditure amounting to Rs. 501201/- under 3rd limb of Rule 8D arbitrarily, without any justification and ignoring the facts that administrative expenses were incurred for carrying out the main business of financing by the appellant. 2.1 It id contended that the disallowance @0.5% of average investment under 3rd limb of Rule 8D is applicable on those investment from whom exempted income is earned and investment on which no exempt income
Page 2 of 3 has been earned must be excluded for the propose of 0.5% disallowance in view of decision of various High Court.”
The first ground of appeal
is general in nature and therefore same is dismissed.
3. The second ground of appeal is against confirmation of addition of Rs. 420530/- u/s 14A of the Income Tax Act.
4. The brief facts of the case is that assessee is a non-banking financial company who filed its return of income on 20.09.2011 showing income of Rs. 7993683/-. During the year the assessee has earned exempt income of Rs. 36189/- as dividend income. The assessee itself has disallowed a sum of Rs. 4628287/- u/s 14A of the Act applying the provisions of Rule 8D of the Income Tax Rules, 1962 in its revised return of income filed on 29.03.2013. The assessee submitted the computation of disallowance vide para No. 3.3 of the order at Rs. 4628867/-. However, the ld Assessing Officer rejected the computation of the disallowance and recomputed the same and worked out disallowance u/s 14A at Rs. 5049397/-. As the assessee has already disallowed a sum of Rs. 4628867/- made the balance disallowance of Rs. 420530/- to the total income and computed the total income of the assessee at Rs. 12756222/- against the revised return income of Rs. 12356720/-. Assessee preferred appeal before the ld CIT(A) unsuccessfully and therefore, assessee in appeal before us.
5. The ld AR submitted that disallowance u/s 14A of the Income Tax Act cannot exceed the exempt income. He relied upon the decision of Hon'ble Delhi High Court in case of Liquid Investment and contested that appellant should succeed on this ground only.
6. The ld DR relied upon the orders of lower authorities.
7. We have carefully considered the rival contentions. Apparently the assessee has earned exempt income of Rs. 36189/- only and has already disallowed a sum of Rs. 4628867/- swallowing the entire amount of exempt income. The Hon'ble Delhi High Court in case of Joint Investment Pvt. Ltd. Vs. CIT 372 ITR 694 has held that disallowance u/s 14A cannot swallow the entire amount as it has happened in this case. Therefore, following the decision of the jurisdictional High Court we are of the opinion that as already assessee has disallowed much more than the exempt income of Rs. 36189/- no further disallowance can be made. In the result ground NO. 2 of the appeal of the assessee is allowed directing the ld Assessing Officer to delete the addition of Rs. 420530/- u/s 14A of the Act.