2019 (5) TMI 1306 - AT - Income Tax

Tribunal Upholds CIT(A)'s Order on Section 14A Disallowance Limitation

The Tribunal upheld the order of the Ld.CIT(A) in restricting the disallowance under section 14A of the Income Tax Act to the amount of exempt income ... Disallowance u/s 14A r.w.r. 8D - no exempt income is received or receivable during the previous year - HELD THAT:- On a perusal of the decision of the Coordinate Bench, we find that identical issue came up for hearing for the A.Y. 2011-12 wherein the Tribunal sustained the order of the CIT(A) in restricting the disallowance u/s. 14A r.w.r. 8D to the dividend income earned by the assessee during the relevant Assessment year. In view of the order of the Tribunal for the A.Y. 2011-12 [2019 (3) TMI 1583 - ITAT MUMBAI] and the facts being identical, we uphold the order of the CIT(A) in restricting the disallowance u/s. 14A r.w. Rule 8D to the dividend income earned by the assessee during these three Assessment years which are under appeal before us. Accordingly, we sustain the order of the CIT(A) and uphold the findings. Grounds raised by the Revenue are dismissed. Issues:- Disallowance under section 14A of the Income Tax Act, 1962.Analysis:1. The appeals and cross objections were filed by the Revenue and assessee for the assessment years 2012-13, 2013-14, and 2014-15 against the orders of the Ld. Commissioner of Income-tax (Appeals). The common ground raised by the Revenue was regarding the disallowance under section 14A of the Income Tax Act, 1962.2. The Ld. Counsel for the assessee highlighted a similar issue that came up before the Tribunal for the A.Y. 2011-12, where the Tribunal upheld the order of the Ld.CIT(A) in restricting the disallowance u/s. 14A to the dividend income earned by the assessee during that assessment year. The Ld. Counsel requested to follow the same approach for the current assessment years under appeal.3. The Ld. DR supported the orders of the Assessing Officer and cited relevant case laws to strengthen their position. However, after hearing both sides and examining the orders of the Authorities below, the Tribunal found that a similar issue was decided in favor of the assessee for the A.Y. 2011-12. The Tribunal upheld the order of the Ld.CIT(A) in restricting the disallowance u/s. 14A to the exempt income earned by the assessee during the relevant assessment year.4. The Tribunal referred to the decision of the Hon'ble Delhi High Court in the case of Cheminvest Ltd. and Joint Investment P. Ltd., which emphasized that the disallowance under section 14A cannot exceed the exempt income. In the present case, the disallowance made by the Assessing Officer far exceeded the exempt income earned by the assessee, leading the Tribunal to uphold the order of the Ld.CIT(A) in restricting the disallowance to the amount of exempt income.5. Based on the previous Tribunal order and the identical nature of the issue, the Tribunal upheld the order of the Ld.CIT(A) in restricting the disallowance u/s. 14A to the dividend income earned by the assessee for the assessment years in question. Consequently, the Tribunal dismissed the grounds raised by the Revenue and the cross objections filed by the assessee.6. In conclusion, the appeals of the Revenue and cross objections of the assessee were dismissed, and the order was pronounced in the open court on the specified date.