The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) held that the disallowance should not exceed the amount of exempt income.
The assessee, Ambuja Neotia Hotel Ventures, had appealed against the order passed by the Commissioner of Income Tax (Appeals) for the assessment year (AY) 2014-15.
The ITAT observed that the ground No. 1 raised by the assessee was a general one which required no adjudication.
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One of the issues that was raised by the company was in challenging the confirmation of disallowance of Rs. 35,355 by the CIT(A) , which was initially disallowed by the assessing officer (AO) under Section 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1963.
The assessee, for the AY 2014-15, had claimed Rs. 3,929 as exempt income which it had earned by the way of dividend income. The assessee disallowed Rs. 13,355/- as expenditure related to exempt income. The AO, unsatisfied, applied Section 14A with Rule 8D, disallowing Rs. 4,03,502, which was later deleted by the CIT(A).
By quoting the decision of the Calcutta High Court in the case of PCIT, 1, Kolkata Vs. M/s Jas Toll Road Company in ITAT/7/2024, IA No. GA/2/2024, dated 26.02.2024, the assessee strongly contended that the suo moto disallowance made by the assessee of Rs. 13,355 should be curtailed to Rs. 3929. In the above-mentioned judgement of the Calcutta High Court, the court had held that the disallowance should not exceed the amount of exempt income.
ITAT considered the judgement of Calcutta HC and held that the disallowance should not exceed the amount of exempt income.
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The bench directed the AO to restrict the disallowance to Rs.3929, the amount of dividend income earned during the year.
The ITAT, comprising Pradip Kumar Choubey (Judicial Member) and Rajesh Kumar (Accountant Member), allowed the assessee’s appeal for statistical purposes.
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