Nirma Chemical Works (P) Ltd. v. Dy. CIT

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The Tax Publishers2020 TaxPub(DT) 4959 (Ahd-Trib)

INCOME TAX ACT, 1961

Section 14A

Where there was no justification for making disallowance, out of interest expenditure incurred on earning exempt income and, order in the case of assessee for assessment year 2012-13 [I.T.A. No.750/Ahd/2016, dt. 3-12-2018] wherein disallowance in respect of administrative expenditure was restricted after taking into consideration total exempt income earned by the assessee, therefore, disallowance was restricted out of administrative expenses and accordingly, appeal of assessee was partly allowed.

Disallowance under section 14A - Expenditure against exempt income - Amount of disallowance -

Assessment under section 143(3) was completed and disallowance under section 14A out of interest expenses and a sum out of administrative expenditure was made under section 14A. CIT(A) had confirmed this addition, however, ITAT vide ITA No. 2281/Ahd/2008 had set aside the issue to AO for deciding the issue afresh after verification of details and revised working of interest expenses furnished by assessee. Held: There was no justification for making disallowance out of interest expenditure incurred on earning exempt income. Order in case of assessee for assessment year 2012-13 [I.T.A. No.750/Ahd/2016, dt. 3-12-2018] wherein disallowance in respect of administrative expenditure was restricted after taking into consideration the total exempt income earned by assessee. Therefore, disallowance was restricted out of administrative expenses of Rs. 7 lakhs as assessee had earned dividend income of Rs. 77,60,108 as against total exempt income of Rs. 63,35,308 earned by assessee. Accordingly, the appeal of the assessee was partly allowed.

Followed:Dy. CIT v. Nirma Chemical Works Pvt. Ltd. [ITA. No.750/Ahd/2016, dt. 3-12-2018] and Dy. CIT v. Nirma Chemical Works Ltd [ITA No. 2168/Ahd/2008, ITA No. 2281/Ahd/2008, ITA No. 2273/Ahd/2011, dt. 12-8-2016].

REFERRED :

FAVOUR : Partly In assessee's favour.

A.Y. : 2004-05

IN THE ITAT, AHMEDABAD BENCH