Tribunal Remands Section 14A Disallowance for Fresh Review; Assessee Can Submit New Evidence on Exempt Income.

The assessee's appeal against the National Faceless Appeal Centre's order for the 2018-19 assessment year was allowed for statistical purposes. The Tribunal remanded the issue of disallowance under Section 14A r.w.s. 8D(ii) back to the AO for fresh consideration, focusing on investments that yielded exempt income. The assessee was permitted to submit evidence supporting its claim.

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Issues involved:
The appeal by the assessee against the order passed by the National Faceless Appeal Centre for assessment year 2018-19.

Details of the Judgment:

Issue 1: Disallowance under Section 14A r.w.s. 8D(ii) of the Rules
The only issue to be decided was whether the addition made by the AO under Section 14A r.w.s. 8D(ii) of the Rules was justified. The assessee earned dividend income which was claimed as exempt income. The AO disallowed an amount for expenditure incurred towards earning the dividend income. The AO adopted the methodology under Rule 8D(2) of the Rules and made a disallowance at 1% on the whole investment. The assessee's submissions were not accepted by the AO or the CIT(A). The Special Bench of ITAT, Delhi was referred to by the assessee, and it was requested to remand the issue to the AO for fresh consideration. The Tribunal agreed with the assessee and remanded the issue to the AO to consider investments that yielded exempt income for the purpose of disallowance of expenditure. The assessee was given liberty to file evidences in support of its claim. The grounds raised by the assessee were allowed for statistical purposes.

Conclusion:
The appeal of the assessee was allowed for statistical purposes, and the issue of disallowance under Section 14A r.w.s. 8D(ii) of the Rules was remanded to the AO for fresh consideration.

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