2021 (11) TMI 740 - AT - Income Tax

Tribunal limits disallowance under section 14A to exempt income amount.

Paliwal GDR Homestyles (P.) Ltd. Versus DCIT, Circle-10 (1), New Delhi.

Paliwal GDR Homestyles (P.) Ltd. Versus DCIT, Circle-10 (1), New Delhi. - TMI Issues:Disallowance under section 14A read with rule 8D of the Income Tax Act, 1961.Analysis:The appeal pertains to the assessment year 2014-15 and challenges the disallowance made under section 14A of the Income Tax Act, 1961, amounting to Rs. 3,07,307. The Assessing Officer also made ad hoc disallowances for certain expenses. The assessee appealed to the Ld.CIT(A), who partially allowed the appeal by deleting one portion of the disallowance but confirming the disallowance under section 14A. The assessee then appealed to the Tribunal.The main contention of the assessee was that the disallowance made exceeded the exempt income earned during the year, which was Rs. 49,489. Citing the judgment of Joint Investment P.Ltd. vs CIT, the assessee argued that disallowance cannot exceed the exempt income. The Ld. Sr. DR supported the lower authorities' orders.The Tribunal, after considering the arguments, noted that the assessee had indeed earned only Rs. 49,489 as dividend income during the relevant year. Referring to the judgment of Joint Investment P.Ltd. vs CIT, the Tribunal held that disallowance under section 14A should be limited to the extent of exempt income. Therefore, the Tribunal directed the Assessing Officer to restrict the disallowance to Rs. 49,489 under section 14A read with Rule 8D of the Rules. Consequently, the grounds raised by the assessee were partly allowed, and the appeal was partly allowed.The decision was pronounced at the conclusion of a virtual hearing on 03.09.2021 in the presence of both parties.