ITAT restricts disallowance under section 14A to exempt income, directs AO for verification.

M/s. Avinash Developers Pvt. Ltd. Versus The Deputy/Assistant Commissioner of Income Tax, Circle-2 (1), Raipur (C.G.)

M/s. Avinash Developers Pvt. Ltd. Versus The Deputy/Assistant Commissioner of Income Tax, Circle-2 (1), Raipur (C.G.) - TMI Issues Involved:
The appeal pertains to the disallowance of Rs. 59,13,532/- under section 14A read with rule 8D of the Income Tax Act, 1961 for the assessment year 2013-14.

Summary:
1. The assessee, a private limited company, filed its return of income for A.Y. 2013-14 showing nil income but paid tax on book profit under MAT. The case was selected for scrutiny, and an addition of Rs. 59,13,532/- was made under section 14A read with rule 8D.

2. The assessee's appeal before the CIT(A) was dismissed, leading to the current appeal before the ITAT Raipur challenging the disallowance.

3. The AR argued that no disallowance should be made as no exempt income was earned during the year. They relied on various judicial decisions, emphasizing that the disallowance should be restricted to the extent of exempt income.

4. The DR supported the revenue authorities' orders on the issue.

5. The ITAT held that the change in provision of Section 14A would have no retrospective effect, applying prospectively from 01.04.2022. Considering the exempt income earned by the assessee, the ITAT restricted the disallowance to Rs. 3,82,401/-, in line with judicial precedents.

6. Citing relevant case laws, the ITAT directed the AO to verify the details of exempt income and restrict the addition accordingly. The appeal of the assessee was partly allowed for statistical purposes.

Judicial Pronouncements:
- CIT Vs. Chettinad Logistics Pvt. Ltd. (2018) 257 Taxmann 2 (SC)
- Pr. CIT Vs. Oil Industries Dev. Board, 104 CCH 156 (SC)
- Cheminvest Ltd. vs. CIT (2015) 378 ITR 33 (Del)
- CIT vs. Holcim India P. Ltd. (2014) 90CCH 081-Del-HC
- Principal Commissioner of Income Tax, Patiala vs. State Bank of Patiala [2018] 99 taxmann.com 286 (SC)

Conclusion:
The ITAT restricted the disallowance under section 14A to the extent of exempt income earned by the assessee, setting aside the CIT(A)'s order and directing the AO to verify and adjust the addition accordingly. The appeal was partly allowed for statistical purposes.