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of <h1>Tribunal limits disallowance to exempt income in appeal decision.</h1> <h3>M/s. Rayalla Corporation (P) Ltd. Versus The Deputy Commissioner of Income Tax, Company Circle 5 (1), Chennai</h3> M/s. Rayalla Corporation (P) Ltd. Versus The Deputy Commissioner of Income Tax, Company Circle 5 (1), Chennai - TMI Issues involved:1. Classification of income from letting out of property as 'income from house property' or 'income from business or profession.'2. Disallowance under section 14A read with Rule 8D in relation to exempt dividend income.Issue 1: Classification of Income:The appeal dealt with the classification of income from letting out of property as 'income from house property' or 'income from business or profession.' The Tribunal considered the previous decision of the Hon'ble Jurisdictional High Court in a similar case and noted that the same decision had been reversed by the Hon'ble Supreme Court. Accordingly, the Tribunal decided in favor of the assessee, following the judgment of the Supreme Court.Issue 2: Disallowance under Section 14A:The second issue revolved around the disallowance of expenses under section 14A read with Rule 8D concerning exempt dividend income. The Assessing Officer disallowed an amount exceeding the exempt income earned by the assessee. The Tribunal referred to a case decided by the Hon'ble Delhi High Court, where it was held that the entire tax-exempt income cannot be disallowed. The Tribunal, considering the facts and the Delhi High Court decision, restricted the disallowance to the extent of the exempt income earned by the assessee.In conclusion, the Tribunal partly allowed the appeal, restricting the disallowance made by the Assessing Officer to the extent of the exempt income earned by the assessee. The decision was pronounced on October 16, 2015, in Chennai.
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