Appeal partially granted, deletion of interest disallowance under section 14A of Income-tax Act. The Tribunal partially allowed the appeal, directing the deletion of the addition concerning the disallowance of interest under section 14A of the ...
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Appeal partially granted, deletion of interest disallowance under section 14A of Income-tax Act.
The Tribunal partially allowed the appeal, directing the deletion of the addition concerning the disallowance of interest under section 14A of the Income-tax Act, 1961. The judgment was pronounced on 16th February 2023.
Issues: 1. Disallowance u/s 14A of the Income-tax Act, 1961.
Analysis: The judgment pertains to an appeal against the order passed by the CIT(A) in relation to the assessment year 2018-19. The appeal raised four grounds, with the last ground regarding the addition of a specific amount being dismissed as not pressed. The remaining issue concerned the disallowance u/s 14A of the Income-tax Act, amounting to Rs.3,94,25,461. The assessee had claimed exempt income but did not offer any disallowance u/s 14A. The Assessing Officer (AO) computed the disallowance in two parts, which the CIT(A) upheld, leading the matter to the Tribunal.
The Tribunal considered the contentions and relevant material on record. The first component of the disallowance was challenged by the assessee, arguing that the calculation method used by the AO led to a higher disallowance. The Tribunal agreed with the assessee's interpretation of the rule and directed the matter back to the AO for recalculation based on the correct method. Regarding the second component of the disallowance, the Tribunal focused on the disallowance of interest amounting to Rs.1,95,62,471. It was noted that this interest was on a loan taken for properties unrelated to the investments generating exempt income. The Tribunal observed that the non-interest bearing funds available with the assessee exceeded the investments in exempt income-yielding securities. Citing a Supreme Court decision, the Tribunal ruled that no disallowance of interest could be made when interest-bearing funds exceeded investments in such securities. Consequently, the disallowance of interest was ordered to be deleted.
In conclusion, the Tribunal partially allowed the appeal, directing the deletion of the addition concerning the disallowance of interest. The judgment was pronounced in the Open Court on 16th February 2023.
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