2020 (7) TMI 222 - HC - Income Tax

High Court upholds disallowance of expenditure under Section 14A

The Commissioner of Income tax, Chennai Versus M/s. Dewa Properties Ltd.

The High Court of Madras dismissed the appeal by the Revenue concerning the disallowance of expenditure under Section 14A of the Act. The Court found that ... Disallowance u/s 14A - disallow the expenditure incurred in relation to earning an income which is exempt from payment of tax - substantial question fo law or not? - as per tribunal since the assessee has only invested in private limited, un-listed companies and one of the companies in which the assessee has made investment is its own group concern addition made by the CIT (Appeals) is on the higher side and addition of Rs.Two Lakhs is just and reasonable amount towards disallowance u/s.14A - HELD THAT:- No substantial question of law in the present appeal under Section 260A of the Act. The extent of expenditure to be disallowed under Section 14A of the Act would naturally depend upon the income earned by the Assessee and spending that income and extent of exemption they have drawn. Since the Tribunal has discussed the relevant facts in paragraph 6 quoted above, we do not find any perversity in the order passed by the Tribunal and the disallowance made under Section 14A of the Act appears to be just and reasonable and therefore, we do not find any substantial question of law in the present appeal by the Revenue, which requires our further consideration under Section 260A of the Act. Accordingly, the present appeal is liable to be dismissed Issues:1. Disallowance of expenditure under Section 14A of the Act.Analysis:The High Court of Madras, comprising Hon'ble Dr. Justice Vineet Kothari and Hon'ble Mr. Justice Krishnan Ramasamy, conducted a video conference in accordance with the Full Court's resolution. The appeal dealt with the disallowance of Rs. 2.00 Lakhs under Section 14A of the Act by the Tribunal. The Tribunal's order highlighted the assessee's investments in private limited, unlisted companies, emphasizing that the investments were made from the assessee's own sources without the use of interest-bearing funds. The Tribunal estimated the disallowance amount at Rs. 2.00 Lakhs, considering the investment portfolio of Rs. 50.86 Crores and the nature of investments made by the assessee. Both the appellant's counsel and the respondent's counsel agreed that no substantial question of law arose under Section 260A of the Act for the Court's consideration.The Court, after hearing arguments from both sides, concluded that the Tribunal's findings did not raise any substantial question of law for consideration under Section 260A of the Act. The Court emphasized that the extent of expenditure to be disallowed under Section 14A depended on the income earned by the assessee, their spending, and the extent of exemption obtained. As the Tribunal had discussed the relevant facts in detail and the disallowance appeared just and reasonable, the Court found no perversity in the Tribunal's order. Consequently, the Court dismissed the appeal by the Revenue, stating that no substantial question of law required further consideration under Section 260A of the Act. The appeal was dismissed without costs.