2020 (6) TMI 173 - AT - Income Tax

Tribunal Upholds Decision Limiting Tax Disallowance to Exempt Income for 2012-13, Dismisses Revenue's Appeal.

The ITAT Kolkata dismissed the revenue's appeal, affirming the CIT(A)'s decision for the assessment year 2012-13. The Tribunal upheld the CIT(A)'s ... Disallowance u/s 14A r.w.r. 8D - CIT(A) has given relief to the assessee by holding that the amount of disallowance u/s. 14A should be restricted to the amount of exempt income only and not a higher figure. - HELD THAT:- This issue we note is no longer res integra and as rightly noted by the Ld. CIT(A), the Hon’ble Supreme court [2018 (11) TMI 1565 - SC ORDER] has upheld similar view of the Hon’ble High court of Punjab & Haryana in PCIT Vs. State Bank of Patiala [2017 (5) TMI 843 - PUNJAB AND HARYANA HIGH COURT] and the Ld. CIT(A) has relied on the decision of the coordinate bench of this Tribunal in the case of West Bengal Infrastructure Development [2015 (11) TMI 926 - ITAT KOLKATA] to come to the decision that disallowance u/s. 14A of the Act to be restricted to the amount of exempt income only and not at a higher figure. Therefore, we find no infirmity in the order of the Ld. CIT(A) and therefore, we confirm it. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [2020 (5) TMI 359 - ITAT MUMBAI] Issues:- Appeal filed by revenue against CIT(A) order for assessment year 2012-13- Time-barred appeal by 12 days- Ground of appeal against deletion of addition made under section 14A of the Income-tax Act, 1961- Revision proceedings initiated by Pr. CIT-2 Kolkata- AO's computation of disallowance under section 14A read with Rule 8D- Ld. CIT(A)'s directions to AO for recalculation of disallowance- Restriction of disallowance to the extent of exempt income- Judicial decisions cited regarding restriction of disallowance- Tribunal's confirmation of Ld. CIT(A)'s order- Exclusion of lockdown days in pronouncing the orderAnalysis:1. The Appellate Tribunal ITAT Kolkata heard an appeal by the revenue against the CIT(A) order for the assessment year 2012-13. The appeal was initially time-barred by 12 days, but the delay was condoned, and the appeal was admitted for hearing.2. The main issue raised in the appeal was against the deletion of the addition made by the Assessing Officer (AO) under section 14A of the Income-tax Act, 1961, read with Rule 8D of the Income-tax Rules. The AO had made certain disallowances, which were challenged by the assessee.3. Revision proceedings were initiated by the Principal CIT-2 Kolkata based on over-assessment of Long Term Capital Loss and disallowance under section 14A. The AO computed the disallowance under section 14A read with Rule 8D, which was further contested by the assessee before the CIT(A).4. The CIT(A) directed the AO to recalculate the disallowance and restrict it to the amount of exempt income only, citing various judicial decisions supporting this approach. The Tribunal upheld the CIT(A)'s order, emphasizing that the disallowance under section 14A should be limited to the amount of exempt income earned during the year.5. The Tribunal also noted the extraordinary situation due to the COVID-19 pandemic and lockdown, excluding lockdown days in pronouncing the order. Ultimately, the Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision to restrict the disallowance to the extent of exempt income.This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive overview of the case and the Tribunal's decision on each issue.