Tribunal limits disallowance under sec 14A to exempted income, overrules CIT(A).

The Tribunal partially allowed the appellant's appeal by restricting the disallowance under section 14A to the amount of exempted income, following a Co-ordinate Bench's decision. The Tribunal directed the deletion of a portion of the disallowance made by the AO, setting aside the CIT(A)'s order.

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Issues:
Challenge to disallowance under section 14A of the Income Tax Act, 1961.

Analysis:
The appellant contested the disallowance of Rs. 4,22,992 under section 14A for the assessment year 2009-10. The appellant argued that the disallowance exceeded the amount of exempted income, which was only Rs. 20,000. The appellant relied on a Co-ordinate Bench decision in a similar case where it was held that the disallowance cannot surpass the exempted income. The appellant's contention was opposed by the Revenue, stating that the facts differed from the referenced case.

The Tribunal examined the case and found that the appellant had earned Rs. 20,000 as dividend income, but the AO disallowed Rs. 4,22,992 under rule 8D. The Tribunal noted that the issue raised by the appellant was similar to the case decided by the Co-ordinate Bench. Referring to the Co-ordinate Bench's decision, the Tribunal directed the AO to restrict the disallowance to the extent of the exempted income, i.e., Rs. 20,000. The Tribunal set aside the CIT(A)'s order and partially allowed the appellant's appeal by directing the deletion of Rs. 4,02,992 out of the total disallowance of Rs. 4,22,992.

In conclusion, the Tribunal partially allowed the appellant's appeal by restricting the disallowance under section 14A to the amount of exempted income, following the Co-ordinate Bench's decision and directing the deletion of a portion of the disallowance made by the AO.

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