ACIT 10(1), MUMBAI vs. DR. RAMA SANKARNARAYANA IYER, MUMBAI
In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.
What did the Tribunal hold?
The CIT(A) deleted the disallowance, holding that expenses can only be disallowed under Section 14A if they have been incurred and claimed for earning exempt income. The Tribunal agreed that the assessee had not claimed any expenditure attributable to earning the exempt income.
What were the facts?
The assessee claimed dividend income as exempt. The Assessing Officer disallowed expenses under Section 14A read with Rule 8D, computing a disallowance of Rs. 14,74,197.
What were the issues?
Whether disallowance under Section 14A is warranted when no expenditure has been incurred or claimed 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, MUMBAI BENCHES “D”, MUMBAI
Before: Shri N.K.Billaiya, AM & Shri Amarjit Singh, JM
आदेश / O R D E R
Per N.K.Billaiya (AM) : This appeal by the Revenue is preferred against the order of the Commissioner of Income-tax (Appeals) – 21, Mumbai, dated 23.04.2012 pertaining to assessment year 2009-2010.
The sole reason of the Revenue is that the CIT(A) erred in deleting addition of Rs.14,74,197 made u/s 14A of the Act. Briefly stated the facts of the case are that the assessee is rendering consultancy services as a proprietor of M/s.RGR Consultants in the field of Chemical Engineering. While scrutinizing the return of income, the AO noticed that the assessee has received dividend of Rs.1.78 crore, which was claimed exempt u/s 10(38) of Dr.Rama Sankarnarayan Iyer. the Act, along with long term capital gain claimed exempt u/s 10(34) / 10(35) of the Act.
The assessee was asked to explain why disallowance of expenses u/s 14A read with Rule 8D should not be made. The assessee explained that he has not incurred any expenditure for earning the exempt income though he has already disallowed Rs.12,000. This explanation did not find any favour with the AO, who proceeded by computing the disallowance as per the provisions of section 14A r.w.r. 8D and the same was computed at Rs.14,74,197.
Aggrieved by this, the assessee carried the matter before the CIT(A) and reiterated the claim that no expenditure was incurred for earning the exempt income. After analyzing the facts in correct perspective, the CIT(A) was convinced that the expenditure u/s 14A can be disallowed only if the same has been incurred and also claimed for the purpose of earning exempt income. The CIT(A) further observed that the assessee has not deducted / claimed any expenses which could be also attributable to earning of exempt income. After thoroughly examining the income and expenditure account, which is exhibited at page 4 of the CIT(A)’s order. The CIT(A) finally concluded by holding that no disallowance u/s 14A of the Act was required in respect of administrative and managerial expenses. Since the assessee has not claimed any such expenses against taxable income offered under different heads, the disallowance made by the AO was deleted. Aggrieved by this, the Revenue is before us. The learned Departmental Representative strongly supported the finding of the AO. The Counsel for the assessee could
Dr.Rama Sankarnarayan Iyer. not add anything new to what CIT(A) has already considered while giving relief to the assessee.
We have carefully perused the orders of the authorities below. It is an undeniable fact that the assessee has not claimed any expenses, which can be said to be attributable to earning of exempt income. As rightly mentioned by the CIT(A) that all the expenditure claimed in the income and expenditure account are directly related to the rendering of consultancy services in the field of Chemical Engineering. Neither the AO nor the learned DR could point out any expenditure that could have been incurred for earning the exempt income. We, therefore, we do not find any reason to interfere with the finding the CIT(A).
In the result, the appeal filed by Revenue is dismissed.
Order pronounced on this 28th day of October, 2015. आदेश क� घोषणा �दनांकः को क� गई ।
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