Relief to Thomson Press: ITAT Reduces 14A Disallowance from Rs. 7.67 Lakh to Rs. 6.31 Lakh [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) provided relief to Thomson Press India Ltd. by reducing the disallowance under Section 14A of Income Tax Act,1961 from Rs. 7.67 lakh to Rs. 6.31 lakh.

Thomson Press India Ltd,appellant-assessee, engaged in the business of commercial printing and phototypresetting, filed its income tax return for the year on 30.09.2009, showing a loss of Rs. 24.85 crore. The case was scrutinized, and the assessment was completed on 26.12.2011, with an addition of Rs. 4.06 crore, reducing the loss to Rs. 20.78 crore. The assessee appealed the decision, and the Commissioner of Income Tax (Appeals) [CIT(A)] partly allowed the appeal in the order dated 31.01.2019.

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The assessee aggrieved by the decision appealed before the tribunal.

The issue was the disallowance of Rs. 7,66,968/- under section 14A of the Act. The AO noted that the assessee had interest-free income from dividends and capital gains, which were not part of the total income. The Assessing Officer (AO) applied Section 14A and Rule 8D, making the disallowance of Rs. 7,66,968/-, including interest on investment funds and administrative expenses.

The CIT(A), referencing the assessee’s case for AY 2012-13, directed the AO to recompute the disallowance, considering only investments generating non-taxable income. The CIT(A) also instructed the AO to limit the disallowance of Rs. 6,30,937/- that the appellant-assessee had already made in its return.

Read More: Section 14A Disallowance: ITAT Directs Restricting Disallowance to Rs. 12 Lakh, Following Previous Year’s Ruling

The assessee’s counsel stated that a small investment of Rs. 4 lakhs was made during the year and, since the assessee had sufficient own capital and reserves, no disallowance should be made, especially as the assessee had already made a disallowance of Rs. 6,30,937/-.

He relied on the tribunal’s decision for AY 2007-08, where the disallowance under section 14A was deleted due to sufficient interest-free funds available with the assessee. The same approach was followed in later years (AYs 2011-12, 2012-13, and 2013-14).

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The revenue counsel supported the lower authorities' orders, stating that the CIT(A) had already directed the AO to exclude investments not yielding tax-free income. The counsel also pointed out that since the assessee had already made a disallowance of Rs. 6,30,937/-, the disallowance should be limited to this amount.

The two member bench comprising Anubhav Sharma (Judicial Member) and Manish Agarwal (Accountant Member) reviewed the submissions and the material on record. It noted that the assessee made a fresh investment of Rs. 4 lakhs, supported by sufficient interest-free funds. Following the Tribunal’s previous decision for AY 2007-08, the ITAT directed the AO to delete the addition.

Since the assessee had already made a suo motu disallowance of Rs. 6,30,937/-, the disallowance was limited to this amount. The appellate tribunal also observed that the AO had made an additional disallowance of Rs. 7,66,968/-, which was directed to be deleted.

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