Case Law Details
Ramalinga Mills Ltd. Vs ACIT (ITAT Chennai)
The issue under consideration is whether disallowance of expenditure in relation to exempt income u/s.14A read with Rule 8D of I.T. Rules, 1962 is justified in law?
ITAT states that, the facts borne out from records clearly indicate that the assessee has earned dividend for the impugned assessment year. It is a well settled principles of law that disallowance computed u/s.14A read with Rule 8D shall not swallow entire income earned for the year. In other words, disallowance of expenditure u/s.14A read with Rule 8D shall not exceed exempt income earned for the year. This principle is supported by the decision of Hon’ble Delhi High Court in the case of Cheminvest Ltd. vs.CIT (2015) 378 ITR 33, where it was clearly held that disallowance of expenditure u/s 14A shall not exceed exempt income earned for the year . A similar view has been taken by the Chennai Bench of the Tribunal in the case of M/s. Voltech Engineers Pvt. Ltd Vs. DCIT (2017) 163 ITD 469. In this case, although the dividend income earned for the year, the Assessing Officer has computed disallowance which is in excess of exempt income earned for the year. Therefore, considering the facts and circumstances of the case and also by following the decision of the Hon’ble Delhi High Court in the case of Cheminvest Ltd. (supra), ITAT direct the Assessing Officer to restrict the disallowance computed u/s.14A read with Rule 8D of I.T.Rules, 1962 to the extent of exempt income earned for the year. In the result, the appeal filed by the assessee is allowed.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals)-1,Madurai dated 31.01.2019 and pertains to the assessment year 2014-15.
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