Cognizant Technology Solutions India Pvt. Ltd. Vs DCIT (ITAT Chennai)
ITAT Restricts Section 14A Disallowance Because Only Investments Yielding Exempt Income Can Be Considered; Computer Software Eligible for 60% Depreciation Because It Falls Under Specific Depreciation Entry; Fresh Claims Remanded Because Long-Term Capital Loss and RBI Compounding Fee Required Verification; ITAT Upholds Set-Off of Section 10AA Unit Losses Based on Binding High Court and Supreme Court Rulings; No Section 14A Addition to MAT Book Profit Because Rule 8D Disallowance Cannot Be Added Back.
The assessee and the Revenue filed cross appeals against the orders of the Commissioner of Income Tax (Appeals)-18, Chennai, for Assessment Year 2015-16 arising from the assessment completed under Section 143(3) of the Income-tax Act, 1961.
Assessee’s Appeal
Disallowance under Section 14A
The assessee challenged the disallowance of expenditure relating to exempt dividend income under Section 14A read with Rule 8D. The Tribunal noted that the assessee’s contention was that the disallowance should be restricted only to investments that actually yielded exempt income. Observing that this issue was consistently decided by various High Courts and the Tribunal, it directed the Assessing Officer (AO) to examine each investment portfolio and compute the disallowance only with reference to investments that generated exempt income. This ground was allowed for statistical purposes.
