Tribunal limits disallowance under Income-tax Act, cites High Court judgment. Assessing Officer to adjust exempt income.

The Tribunal partially allowed the assessee's appeals by restricting the disallowance under section 14A of the Income-tax Act to the amount of exempt income only. The Tribunal referred to a High Court judgment and directed the Assessing Officer to make the disallowance in line with the exempt income. The first ground of appeal was dismissed, while the second ground was partially allowed. The decision in one appeal applied to the other due to identical facts and issues. The judgment was delivered on January 25, 2019, by tribunal members Ms. Sushma Chowla, JM, and Shri Anil Chaturvedi, AM.

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Issues involved:
- Disallowance made under section 14A of the Income-tax Act, 1961
- Whether disallowance under section 14A should be restricted to the amount of tax-exempt income

Analysis:
1. The judgment pertains to two appeals filed by the assessee against a consolidated order of CIT(A)-2, Kolhapur, for assessment years 2013-14 and 2014-15 under section 143(3) of the Income-tax Act, 1961.

2. The issue raised in the appeals is regarding the disallowance made under section 14A of the Act. The assessee challenged the disallowance made under section 14A read with Rule 8D of the Income Tax Rules, 1962, and contended that the disallowance should be restricted to the amount of tax-exempt income under section 14A.

3. The Authorized Representative for the assessee argued that the disallowance made by the CIT(A) exceeded the exempt income for both assessment years. The exempt income for 2013-14 was Rs. 80,676, and the disallowance was Rs. 2,30,000. For 2014-15, the exempt income was Rs. 84,105, and the disallowance was Rs. 2,29,560.

4. The Departmental Representative for the Revenue relied on the orders of the lower authorities. However, the Tribunal found that the issue raised was covered by a judgment of the Hon’ble High Court of Delhi in DCIT Vs. Joint Investment Pvt. Ltd. The Tribunal directed the Assessing Officer to restrict the disallowance under section 14A to the extent of exempt income only.

5. Consequently, the Tribunal partly allowed the appeal by restricting the disallowance to the amount of exempt income. The first ground of appeal raised by the assessee was dismissed, while the second ground was partly allowed.

6. The Tribunal noted that the facts and issues in both appeals were identical, and the decision in one appeal would apply to the other. Therefore, both appeals of the assessee were partly allowed based on the above analysis.

7. The judgment was pronounced on January 25, 2019, by the members of the tribunal, Ms. Sushma Chowla, JM, and Shri Anil Chaturvedi, AM.

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