Tribunal overturns disallowance under section 14A due to incorrect calculation. The Tribunal allowed the appeal, directing the assessing officer to delete the disallowance under section 14A amounting to Rs. 2,97,99,176/- due to ...
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Tribunal overturns disallowance under section 14A due to incorrect calculation.
The Tribunal allowed the appeal, directing the assessing officer to delete the disallowance under section 14A amounting to Rs. 2,97,99,176/- due to incorrect calculation and recording of satisfaction. The delay in filing the appeal, attributed to the Covid-19 lockdown, was condoned. The assessing officer's failure to record satisfaction on the claim of no expenditure for earning exempt income led to the reversal of the disallowance decision. The order in favor of the assessee was pronounced on 23.12.2021.
Issues: Disallowance under section 14A - Incorrect calculation and recording of satisfaction by assessing officer, interpretation of rule 8D(2), delay in filing appeal due to Covid-19 lockdown.
Analysis: 1. The appeal was filed against the disallowance of Rs. 2,97,991 76/- under section 14A for the assessment year 2018-19. The assessing officer determined the disallowance based on the exempt income earned by the assessee from investments in partnership firms and dividend income. The disallowance was confirmed by the Commissioner of Income-tax (Appeals).
2. The delay in filing the appeal was attributed to the Covid-19 lockdown, leading to an 18-day delay. The Tribunal condoned the delay considering the exceptional circumstances.
3. The authorized representative argued that the assessing officer did not record satisfaction regarding the correctness of the claim that no expenditure was incurred for earning exempt income before quantifying the disallowance under rule 8D(2). It was contended that only investments generating tax-free income should be considered for disallowance. The CIT (A) upheld the disallowance without providing reasons, which was challenged.
4. The departmental representative supported the lower authorities, stating that the interpretation of the old rule 8D was being referenced, not the amended rules.
5. The Tribunal observed that the assessing officer failed to record satisfaction on the claim of no expenditure for earning exempt income. The disallowance of Rs. 2,97,99,176/- was found to be incorrect as only a portion of the total expenditure could be considered for disallowance. The Tribunal reversed the lower authorities' decision and directed the assessing officer to delete the disallowance under section 14A.
6. Consequently, the appeal of the assessee was allowed, and the order was pronounced on 23.12.2021.
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