Appellate Tribunal recalls order, allows assessee's petition, restricts disallowance to exempt income.

The Appellate Tribunal recalled its order to adjudicate the alternative ground regarding disallowance under section 14A read with Rule 8D. The Tribunal allowed the assessee's Miscellaneous Petition, acknowledging the oversight in not addressing the alternative ground initially. Subsequently, the Tribunal directed the Assessing Officer to restrict the disallowance to the exempt income claimed by the assessee, resulting in the partial allowance of the assessee's appeal and the dismissal of the Revenue's appeal.

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Issues:
Recall of order for adjudicating alternative ground under section 14A read with Rule 8D.

Detailed Analysis:
The Appellate Tribunal ITAT Chennai addressed a Miscellaneous Petition filed by the assessee seeking to recall the order passed in ITA No.57/Mds/2015 to consider the alternative ground no.7 related to the disallowance made under section 14A read with Rule 8D of the Income Tax Rules. The Tribunal acknowledged that while disposing of the appeal, it inadvertently omitted to decide the alternative ground raised by the assessee (Para 1-2).

The alternative ground raised by the assessee contended that the disallowance made under section 14A was incorrect and unsustainable in law. The Departmental Representative did not object to recalling the order to address the alternative ground left unadjudicated (Para 3-4).

The Tribunal recognized the mistake in not disposing of the alternative ground and decided to recall the order for the limited purpose of addressing this issue. The Miscellaneous Petition filed by the assessee was allowed accordingly (Para 5).

Regarding the merits of the alternative ground, the counsel for the assessee argued that the disallowance under section 14A should be restricted to the exempt income earned, which was &8377; 5,55,455, even though the Assessing Officer had disallowed a higher amount. The counsel relied on precedents to support this contention (Para 6).

After considering the arguments from both parties, the Tribunal referred to a decision by the Mumbai Bench where it was held that the disallowance under section 14A read with Rule 8D cannot exceed the exempt income. Applying this principle, the Tribunal directed the Assessing Officer to restrict the disallowance to the exempt income claimed by the assessee, i.e., &8377; 5,55,455. Consequently, the alternative ground of appeal of the assessee was allowed, and the final result of the appeal was that the assessee's appeal was partly allowed, while the Revenue's appeal was dismissed (Para 7-8).

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