TaxTMI 
TaxTMI 
2025 (8) TMI 1105
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....HL) without appreciating the facts that i) the adjustment is based on the term of agreement signed between EAHL and the assessee, (i) the charging of interest in next F.Y. does not absolve the assessee of mistake of not charging the interest in the F. Y. under consideration. 2. On the facts and in the circumstances of the case, the Ld CIT(A) erred in not disallowing u/s 14A of Rs. 105,05,09,930/ despite the fact that assessee itself has disallowed amount of Rs. 79,96,69,966/-u/s 14A of the Act in its return of income and AO has done further disallowance of Rs 25,08,39,964/- u/s 14A of the Act. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in restricting disallowance made under section 14A of the I.T. Act to the extent of tax exempt income earned during the year by overlooking the clarification of legislative intent provided by the CBDT vide Circular No. 5/2014 dated 11.02.2014 and to this effect even an amendment was made by Finance Act, 2022 by way of insertion of Explanation to Section 14A of the Act." 4. On the facts and circumstances of the case, the Ld. CIT(A) erred in restricting the disallowance u/s 14A of the Income Ta....
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....see was partly allowed, however the department remain aggrieved on the issues for which relief was allowed to the assessee. Consequently, the present appeal if filed by the department for our consideration. Ground No. 1: The transfer pricing adjustment 4. Apropos, Ground no. 1 of the appeal of revenue, Ld. AR of the assessee requested to concede as per instructions of assessee vide letter dated 12.08.2025, to decide the same in favour of revenue. The contents of the request are extracted as under: "Kindly refer to the above matter fixed for hearing before Your Honours on 13.08.2025. In this regard, it is submitted that in the present appeal, the Department has challenged, inter alia, the deletion of transfer pricing adjustment of Rs. 36,57,688/- being notional interest on outstanding receivable from Associated Enterprise. Since the present appeal involves transfer pricing issues, the appeal ought to have been fixed before the 'K' Bench of the Hon'ble Tribunal. Be that as it may, in the interest of an early disposal of the appeal and looking at the smallness of the amount involved in the transfer pricing issue, it is submitted that this ground is conceded ....
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....sallowance u/s 14A to the extent of exempt Income earned. Ld. CIT(A) had decided the issue in favour of the assessee with following observations: 6.2.2 Decision: I have considered the assessment order of the A.O and the submissions along with case laws made by the appellant. It is observed that the A. O in the assessment order passed u/s 143(3) r.w.s. 144C(3) of the Act dated 22.04.2016, had worked out the disallowance u/s. 14A r.w.r 8D at Rs. 105,05,09,930/- However, the assessee itself has disallowed amount of Rs. 79,96,69,966/- u/s. 14A in its return of income, the A.O. has done further disallowance of Rs. 25,08,39,964/- u/s. 14A of the Act. 6.2.3 During the course of assessment proceedings, the Appellant stated that the assessee company has not received any exempt income during the year. It is submitted that in absence of any exempt income earned by the assessee, no disallowance can be made u/s 14A of the Act. In order to support the said contention, reliance is placed on the decision of the Hon'ble Bombay High Court in the case of PCIT v. Ballarpur Industries (ITA No. 51 of 2016) dated 13.10.2016. 6.2.4 Further, the Appellant mentioned that disal....
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....nvestments Vs. DCII (ITA No. 3763/Del 2013 for A. Y. 2009-10, dated 29.04.2015) (iii) M's Daga Global Chemicals ( Vs. Asst. CIT [ITA No. 5592/Mum/2012 dated 01.01.2015). (iv) M's Global Capital Lad. Vs. ACIT (ITA No. 6586/Del/2013 for A. Y. 2009-10, dated 27.11.2015] (v) DCIT VS. DCM Lad. [ITA No. 4467/Del/2012 for A. Y. 2009-10, dated 01.09.015)" Accordingly, in terms of our aforesaid observations, we are of the considered view that the disallowance under Sec. 14A in the case of the present assessee was liable to be restricted to the extent of the amount of the exempt dividend income of Rs. 53,04,157/- that was earned by the assessee during the year under consideration. 9. On answering the aforesaid issue in affirmative, we shall now traverse to the second aspect i.e. whether is it permissible for the assessee to seek restriction of the disallowance under Sec. 14A at an amount lower than that which was offered on a suo motto basis in its return of income for the year under consideration. As observed by us hereinabove, the assessee had in its Original return of income voluntarily offered a disallowance under Sec. 14A of Rs. 9,63,....
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....he judgment of the Hon'ble High Court of Gujarat in the case of CIT Vs. MiltonLaminates Ltd. (2013) 37 taxmann.com 249 (Guj). In the aforesaid case, the issue before the Hon'ble High Court was as to whether the Tribunal was justified in law and on facts in directing the A.O to give effect to the order of the CIT(A) without restricting the income to the returned income. On a perusal of the facts as were involved in the aforesaid case before the Hon'ble High Court, we find, that the A.O was of the view that by virtue of the decision of the Hon'ble Supreme Court in the case of CIT V's. Shelly Products (2003) 261 ITR 367 (SC) and CBDT Circular No. 549, dated 31.10.1989, while giving effect to the order of the CIT(A) the assessed income of the assessee could not be brought below the returned income. On appeal, the CIT(A) upheld the aforesaid view of the A.O. However, the Tribunal by relying on the judgement of the Hon'ble High Court Gujarat in the case of Gujarat Gas Company Ltd. Vs. JCIT (2000) 245 ITR 84 (Guj) allowed the appeal of the assessee. On further appeal by the revenue, it was observed by the High Court that while giving the effect to the CITA) order i....
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....bservations, following the decision of ITAT, Mumbai in assessee own case for earlier AY, Ld. CIT(A) allowed the ground of appeal on the issue of disallowance u/s 14A in favour of the assessee, observing that as there is no exempt income earned by the assessee, no disallowance u/s 14A is called for. 9. The aforesaid findings of the Ld CIT(A) are not found acceptable by the revenue; therefore, the present appeal is instituted before us. 10. At the outset Ld CIT-DR, vehemently supported the order of Ld AO and submitted that the Ld. CIT(A) had erred in not confirming the disallowance made by Ld. AO for Rs. 105.05 Crore, despite the fact that assessee itself had suo moto disallowed an amount of Rs. 79.96 Crore U/s 14A of the Act. Ld. CIT(A) had overlooked the legislative intent provided by CBDT vide circular No. 5/2014 dated 11.02.2014. 11. Per contra, Ld AR of the assessee, placed his reliance on the order of Ld. CIT(A) and the order of ITAT in the assessee's own case for AY 2010-11 in ITA No. 1831/Mum/2015 dated 06.01.2020 and submitted that the issue decided by the Ld. CIT(A) is squarely covered by the decision of ITAT as well as judgment of various Hon'ble Courts referred t....