Assessee's appeal partly allowed by Tribunal on personal use and section 14A disallowance

The appeals filed by the assessee were partly allowed. The Tribunal dismissed general grounds and those considered 'not pressed.' The Tribunal allowed grounds related to the ad hoc disallowance on account of personal use and the disallowance under section 14A read with Rule 8D. The order was pronounced on 20th September 2018.

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Issues Involved:

1. Legality of the order passed by the Ld. CIT(A).
2. Treatment of notice issued under section 153A.
3. Sustaining ad hoc disallowance at 10% on account of personal use.
4. Disallowance under section 14A read with Rule 8D of the Income Tax Rules.

Issue-wise Detailed Analysis:

1. Legality of the order passed by the Ld. CIT(A):

The appellants argued that the orders passed by the Ld. CIT(A) were "bad in law and on facts and in the circumstances of the case." However, this ground was considered general in nature and did not require any adjudication. Therefore, this issue was dismissed as 'not pressed.'

2. Treatment of notice issued under section 153A:

The appellants contended that the Ld. CIT(A) erred in treating the ground agitating the issuing of notice under section 153A as general and not adjudicating upon it. This ground was also considered 'not pressed' and hence dismissed.

3. Sustaining ad hoc disallowance at 10% on account of personal use:

The appellants challenged the ad hoc disallowance of 10% on account of personal use of expenses such as telephone, car running and maintenance, and depreciation on the car. The appellant argued that as a company, it is a legal entity in the eyes of the law, and no element of personal expenses by directors or office bearers can be attributed without sufficient evidence. The Tribunal observed that the Ld. AO did not point out any instance of inflation in the expenditure claimed nor provided any findings regarding the expenditure being capital in nature. The Tribunal concluded that the Ld. CIT(A) made a general observation for sustaining the addition without sufficient evidence. Therefore, the Tribunal was not inclined to sustain the addition made by the Ld. AO, and this ground was allowed in favor of the assessee.

4. Disallowance under section 14A read with Rule 8D of the Income Tax Rules:

The appellants argued against the disallowance computed by the Ld. AO under section 14A read with Rule 8D, stating that no dividend income was earned during the year under consideration. The Tribunal referred to the decision of the Hon’ble Madras High Court in the case of CIT vs. Chettinad Logistics Pvt. Ltd., which was approved by the Hon’ble Supreme Court. The Tribunal noted that the Hon’ble Delhi High Court in the case of Cheminvest Ltd vs. CIT supported the view that no disallowance under section 14A could be made if no exempt income was earned during the relevant assessment year. Consequently, the Tribunal allowed this ground raised by the assessee and deleted the disallowance computed by the Ld. AO under section 14A read with Rule 8D for the years under consideration.

Conclusion:

The appeals filed by the assessee for all assessment years were partly allowed. The Tribunal dismissed the general grounds and those considered 'not pressed,' while it allowed the grounds related to the ad hoc disallowance on account of personal use and the disallowance under section 14A read with Rule 8D. The order was pronounced in the Open Court on 20th September 2018.

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