Tribunal Overturns Disallowance, Cites Lack of Satisfaction on Exempt Income Expenses; COVID-19 Delays Justified.

The ITAT set aside the disallowance made under Section 14A by the Assessing Officer, finding no satisfaction expressed regarding the expenditure incurred for earning exempt income. The Tribunal deleted the disallowance, relying on precedents. Regarding the delayed pronouncement, the Tribunal justified the delay due to the COVID-19 lockdown, allowing the appeal.

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Issues:
- Disallowance made under section 14A of the Act for the assessment year 2010-2011.
- Procedural issue regarding the delayed pronouncement of the order.

Analysis:
1. Disallowance under Section 14A:
The appeal was against the order of the CIT(A) confirming the addition made under section 14A of the Act by the Assessing Officer. The Assessing Officer disallowed &8377; 10,81,553/- as per sub-rule (2) of Rule 8D of the I.T. Rules for the dividend income earned by the assessee. The assessee contended that no expenditure was incurred for earning the dividend income and no exempt income was claimed. It was argued that the Assessing Officer did not properly establish that the assessee incurred any expenditure for earning the exempt income. The Tribunal noted that the Assessing Officer did not express satisfaction regarding the expenditure incurred for earning the dividend income. The Tribunal emphasized that section 14A requires disallowance of expenditure incurred for earning exempt income. The Tribunal found that the computation under Rule 8D did not consider the actual expenditure incurred by the assessee. Relying on precedents and the case of Cheminvest Ltd, the Tribunal set aside the lower authorities' orders and deleted the disallowance made by the Assessing Officer.

2. Procedural Issue - Delayed Pronouncement of Order:
The Tribunal addressed the procedural issue of delayed pronouncement of the order. While the hearing concluded on 7.2.2020, the order was pronounced after the expiry of 90 days. Referring to Rule 34(5) of the Income Tax Appellate Tribunal Rules, the Tribunal acknowledged the requirement to pronounce orders within 90 days. However, considering the extraordinary circumstances such as the nationwide lockdown due to the COVID-19 pandemic, the Tribunal excluded the period of lockdown from the calculation of the 90-day limit. Citing a similar decision by a coordinate Bench in DCIT vs JSW Limited, the Tribunal emphasized the need to factor in ground realities and the pragmatic approach in interpreting the time limit for order pronouncement. Consequently, the Tribunal allowed the appeal of the assessee and pronounced the order on 5/06/2020.

This detailed analysis covers the issues of disallowance under section 14A of the Act and the procedural issue of delayed pronouncement of the order, providing a comprehensive understanding of the judgment delivered by the Appellate Tribunal ITAT CUTTACK.

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