Facts
The Appellant filed two appeals against the Income Tax Tribunal Order on 30th May 2018 involving proceedings under Section 143(3) of the Income Tax Act 1961. The Appellant’s first appeal was about the Accounting Year 2013-2014. The Appellant’s second appeal was about the Accounting Year 2014-2015. Since the facts and the grounds for these appeals are the same, they were combined together for hearing and deciding.
The main issue under both these appeals is the disallowance under Section 14 A of the Income Tax Act 1961.
During the Accounting Year 2013-2014, the assessee company was involved with real estate commercial or residential developments and hospitality business of lodging and boarding. It filed its return of income for the A.Y. 2013-14 declaring a taxable income of Rs., 1,05,55,890 which was later revised as Rs 1,13,86,340. The book profits were about 1,14,55,394. This case was selected for examination by the Assessing Officer. The Assessing Officer started issuing notices. AR of the appellant responded to the notices by appearing and filing the information. After going through the information, the Assessing Officer completed the assessment by making an addition of Rs. 2,00,000 towards disallowance under Section 37(1) of the Income Tax Act and Rs. 8,34,677 towards disallowance under Section 14A of the Income Tax Act and assessed the total income at Rs. 1,24,21,017. The assessee was aggrieved due to which it filed an appeal to the CIT(A) against the disallowance made under Section 14 A of the Income Tax Act.
Arguments Advanced
The CIT(A) restricted the disallowance under Section 14 A of the Income Tax Act 1961 to Rs 8,39,619. The Assessee wasn’t satisfied due to which it filed an appeal to the ITAT for further restriction.
Court Observation
The Income Tax Appellate Tribunal used the case law CIT vs. Corrteck Engineering Pvt. Ltd. 372 ITR 97 (Gujrat) and Chettinad Logistics Private Limited (2017). ITAT used these case laws to prove that the disallowance of expenditure under Section 14 A of the Income Tax Act 1961 shall not exceed the exempt income earned.
Decision
The Income Tax Appellate Tribunal direct the Assessing Officer to restrict the disallowance under Section 14A of the Income Tax Act 1961 to Rs. 4,99,674 and Rs. 4,28,292 in Accounting Year 2013-2014 and Accounting Year 2014-2015 respectively.
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