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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’ NEW DELHI
Before: SH. H.S. SIDHU & SH. O.P. KANT
PER O.P. KANT, A.M.: This appeal by the assessee is directed against the order of learned Commissioner of Income Tax (Appeals)-XI, New Delhi, dated 28.11.2013, raising the following grounds of appeal:
“1. (a) That on the facts and in the circumstances of the appellant’s case, the learned Commissioner of Income tax (Appeals) erred both in fact and in law in confirming estimated disallowance of expenses of Rs 13,50,032/- out of Rs 15,59,546/- under section 14A of the Income Tax Act, 1961 read with Rule 8D made by the assessing officer without appreciating the facts that the expenses claimed by the appellant was incurred in relation to income which was includible in total income and no expenses was incurred by the appellant in relation to income which does not form part of the total income. 1. (b) That on the facts and in the circumstances of the appellant’s case, the learned Commissioner of Income tax (Appeals) erred both in fact and in law in confirming estimated disallowance of expenses of Rs 13,50,032/- out of Rs 15,59,546/- under section 14A of the Income Tax Act, 1961 read with Rule 8D made by the assessing officer by deducing that the apportionment of direct and indirect expenditure towards taxable and exempt income for determining disallowance under section 14A should be as per Rule 8D irrespective of the fact that there is no nexus between expenses incurred and exempted income earned. 1.(c) That on the facts and in the circumstances of the appellant’s case, the learned Commissioner of Income tax (Appeals) erred both in fact and in law in confirming estimated disallowance of expenses of Rs 13,50,032/- out of Rs 15,59,546/- under section 14A of the Income Tax Act, 1961 read with Rule 8D made by the assessing officer by assuming that Rule 8D of the Income tax Rules, 1962 empowers assessing officer to disallow even such expenses which are incurred in relation to taxable income.
2. That on the facts and in the circumstances of the appellant’s case, the learned Commissioner of Income Tax (Appeals) erred both in fact and in law in holding that premium paid over and above paid- up value of shares is an investment on which dividend will accrue/arise which is in contradiction to the provisions of the Companies Act, 1956.”
Briefly stated facts of the case are that the assessee is engaged in the business of finance and trading in shares/investment. Assessee filed return of income declaring loss of Rs.33,82,64,959/- on 30.09.2019. The return was processed u/s 143(1) of the Income-tax Act, 1961 (for short “the Act”). The case was selected for scrutiny and the assessment u/s 143(3) of the Act was completed at a loss of Rs. 33,67,05,413/- by the Assessing Officer thereby reducing the loss by Rs.15,59,546/-.
Aggrieved, the assessee filed appeal before learned Commissioner of Income Tax (Appeals), who restricted the disallowance u/s 14A of the Act to Rs.13,50,032/-. Hence, the present appeal.
Before us, the learned counsel of the assessee submitted that in the year under consideration the assessee earned exempt income of Rs.6,98,508/- and thus relying on the decision of the Hon’ble Jurisdictional High Court in the case of Joint Investment (P) Ltd vs. Commissioner of Income Tax (2015) 59 taxmann.com 295 (Delhi) the disallowance under section 14A of the Act might be restricted to the extent of exempted income earned.
On the other hand, learner Senior Departmental Representative relied on the orders of the authorities below.
We have heard the rival submissions and perused the relevant material on record. The effective ground is in respect of disallowance of Rs.13,50,032/- under section 14A of the Act, upheld by the learned Commissioner of Income Tax (Appeals). We find that the Hon’ble Jurisdictional High Court in the case of Joint Investment Private Limited (supra) has limited the disallowance in terms of section 14A of the Act read with Rule 8D of Income Tax Rules, 1962 to the extent of exempt income. In the case assessee has declared exempt income of Rs.6,98,508/- whereas disallowance of expenses of Rs.13,50,032/- has been upheld by the learned Commissioner of Income-tax (Appeals) in terms of section 14A of the Act read with rule 8D of Rules. Thus, respectfully following the finding of the Hon’ble High Court in the case of Joint Investment Private Limited (supra), we direct the Assessing Officer to restrict the disallowance under section 14A of the Act to Rs.6,98,508/-. Accordingly, the grounds are allowed partly.
In the result, the appeal is allowed partly. The decision is pronounced in the open court on 2nd Dec., 2016.