2023 (4) TMI 944

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....C) [Commissioner of Income Tax (Appeals), Delhi] (hereinafter referred to as CIT(A)] qua the assessment year 2018-19 on the grounds inter-alia that :- "1. On the facts and circumstances of the case and in law, the CIT(A) erred in restricting the disallowance u/s. 14A r.w.r. 8D to the extent of Rs. 9,60,000/-i.e. suo motto disallowance made by the as against the disallowance of Rs. 3,33,36,712/-computed by the AO being expenses incurred in relation to the exempt income. 2. On the facts and circumstances of the case and in law, the CIT(A) erred in not considering the clarification regarding disallowance of expenses under section 14A of the Income Tax Act, issued by the CBDT vide its circular no. 05/2014 dated 11/02/2014." ....

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....venue challenging the impugned order passed by the Ld. CIT(A) relied upon the order passed by the AO and further relied upon the order passed by the co-ordinate Bench of the Tribunal in case of ACIT vs. Williamson Financial Services Ltd. (2022) 140 taxmann.com 164 (Guwahati-Trib.) and circular No.5 of 2014 issued by the Central Board of Direct Taxation (CBDT). 6. However, on the other hand, the Ld. A.R. for the assessee relied upon the order passed by the Ld. CIT(A) and further contended that in any case disallowance under section 14A cannot be more than the dividend earned during the year under assessment and relied upon the decision rendered by Hon'ble Bombay High Court in cases of HSBC Invest Direct (India) Ltd. (421 ITR 125)[2020], R....

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.... in the assessment order. Thus the AO made a further disallowance of Rs.3,23,76,712/- u/s 14A r.w. Rule 8D of Act. d) During the year the appellant had made investment in shares etc. and claimed the entire Dividend Income as exempt income u/s 10(34) of the Act. 7.3 It has been held in a number of judgments that amount of disallowance u/s 14A cannot exceed the exempt income. In the present case the exempt income earned isRs.7,29,565/- and appellant itself has disallowed Rs.9,60,000/- in the return filed. The AO has made disallowance of Rs.3,33,36,712/- u/s 14A rw Rule 8D which is far in excess of exempt income and suo motto disallowance made by the AO. Reliance is placed on the following judgements which hold that disallowa....

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....t control India Pvt Ltd. (ITA No. 5048/Mum/2016)- It directed the AO is restrict the disallowance u/s 14A to extent of Dividend Income earned i.e. Rs.1,83,000/-. xi) The Hon'ble Apex Court in PCIT vs Oil Industry Development board in 103 taxmann.com 326 and PCIT vs Caraf builders and construction reported in 112 taxmann.com 322 held that disallowance u/s 14A cannot exceed the exempt income. xii) The Hon'ble Apex Court in CIT vs Maxoop Investments Ltd in 402 ITR 640(SC) has held that disallowance u/s 14A cannot exceed exempt income. xiii) The Hon'ble Apex Court in PCIT vs State Bank of Patiala (2018) 99 taxmann.com 286 (SC) held that amount of disallowance u/s 14A should be restricted to amount of exemp....