RAMESH C SHAH HUF,MUMBAI vs. ITO WD 19(2)(2), MUMBAI
What did the Tribunal hold?
The Tribunal held that the disallowance under Section 14A is not legally sustainable if no expenditure is claimed in the P&L account. The issue was remanded to the AO for fresh examination.
What were the facts?
The assessee, an HUF, earned exempt income but claimed no expenditure in its P&L account. The AO disallowed Rs. 3,45,207/- under Section 14A read with Rule 8D, which was confirmed by the CIT(A).
What were the issues?
Whether disallowance under Section 14A is warranted when no expenditure is claimed in the P&L account for earning exempt income.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO
सुनवाई की तायीख / Date of Hearing : 29.06.2016 घोषणा की तायीख /Date of Pronouncement : 29.06.2016 आदेश / O R D E R
PER D. KARUNAKARA RAO, AM:
This appeal filed by the assessee is against the order of the CIT (A)-34, Mumbai dated 19.3.2015.
The only issue involved in this appeal relates to the disallowability of amount of Rs. 3,45,207/- u/s 14A of the Act. This is the case of HUF and earned exempt income of Rs. 4,76,596/- and claimed no expenditure in the P & L Account. In the assessment, AO noticed the claim of exempt income and no disallowance was made u/s 14A of the Act and proceeded to invoke the provisions of section 14A read with Rule 8D of IT Rules, 1962. In this regard, assessee submitted that no such disallowances are warranted since the assessee has not claimed any expenditure on this account and the expenditure incurred by earning of such exempt income was claimed in respect of the capital gains accounts and the coparceners of the HUF. In the assessment, without addressing to the objection of the assessee in this regard, AO disallowed the above sum. On appeal, CIT (A) confirmed the same. Aggrieved, assessee is in appeal before the Tribunal.
Before me, Ld Counsel for the assessee submitted that since no expenditure is claimed in the P & L Account, the disallowance is not legally sustainable in view of various judgments on the subject.
On the other hand, Ld DR for the Revenue relied on the orders of the Revenue Authorities. 5. After hearing both the parties and as per the request of the assessee, I am of the opinion that the fact of such claim of expenditure in the P & L Account relatable to the exempt income of the assessee are not on record. Therefore, for the limited purpose of examination on the issue, I remand this issue to the file of the AO, who shall examine and decide the issue afresh in the light of the binding decisions on the subject. If he comes to the conclusion that no expenses are claimed by the assessee in the P & L account, there is no need for invoking the provisions of section 14A read with Rule 8D of the Act. AO is directed to apply the correct legal position and decide the issue afresh after affording a reasonable opportunity of being heard to the assessee. I order accordingly. 6. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 29th of June, 2016. Sd/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक 29.6.2016 व.नन.स./ OKK , Sr. PS आदेश की प्रतिलऱपि अग्रेपिि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. प्रत्मथी / The Respondent. 2. आमकय आमुक्त(अऩीर) / The CIT(A)- 3. 4. आमकय आमुक्त / CIT 5. ववबागीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai
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