COMPUTER AGE MANAGAMENT SERVICES, CHENNAI V. ACIT, LTU-2, CHENNAI

ITA 933/CHNY/2022

AI Insights

The case revolves around the disallowance of expenses related to exempt income under Section 14A read with Rule 8D of the Income Tax Rules, 1962, for the assessment year 2017-18. Computer Age Management Services Ltd. (the assessee) initially disallowed Rs.34,08,342 as expenses related to earning exempt income of Rs.11.47 lakhs. However, the AO was not satisfied with this disallowance and added another Rs.1,50,66,123, leading to a total disallowance of Rs.1,84,74,465. The CIT(A) upheld this additional disallowance. The Tribunal, referencing the Supreme Court's decision in Maxopp Investment Ltd. vs. CIT, restricted the disallowance to the extent of the exempt income, thus allowing the assessee's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135256 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 07-02-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 02-11-2022
• Other Referred Cases: Maxopp Investment Ltd. vs. CIT
• Laws Referred To: Income Tax Act, 1961, Income Tax Rules, 1962
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

आयकर अपीलीय अिधकरण, ‘सी’ ᭠यायपीठ,चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI ᮰ी महावीर ᳲसह, उपा᭟यᭃ एवं ᮰ी मनोज कुमार अᮕवाल, लेखा सद᭭य के समᭃ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकर अपीलसं./ITA No.: 933/CHNY/2022 िनधाᭅरण वषᭅ/Assessment Year: 2017-18 Computer Age Management Services Ltd., Rayala Tower 1, III Floor, 158 Anna Salai, Chennai – 600 002. PAN: AAACC 3035G vs. The ACIT, Large Taxpayer Unit-2, Chennai. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri Lalith Kumar, CA ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri P. Sajit Kumar, JCIT सुनवाई कᳱ तारीख/Date of Hearing : 08.02.2023 घोषणा कᳱ तारीख/Date of Pronouncement : 10.02.2023 आदेश /O R D E R PER MAHAVIR SINGH, VICE PRESIDENT: This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi in Appeal No.CIT(A), Chennai -17/10564/2019-20 dated 05.09.2022. The assessment was framed by the ACIT, LTU-2, Chennai u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) for the assessment year 2017-18 vide order dated 19.12.2019. 2 ITA No. 933/Chny/2022 2. The only issue in this appeal of assessee is as regards to the disallowance of expenses relatable to exempt income by invoking the provisions of section 14A r.w.s.8D of the Income Tax Rules, 1962 i.e., Rule 8D(2)(iii) of the Rules at Rs.1,50,66,123/- as against suo motto disallowance made by assessee at Rs.34,08,342/-. For this, assessee has raised various grounds, which need not be reproduced because those are argumentative. 3. We have heard rival contentions and gone through the facts and circumstance of the case. Admitted facts are that the assessee has earned exempt income at Rs.11.47 lakhs and claimed the same as exempt in the computation of total income. The AO noted that the assessee suo motto calculated disallowance u/s.14A r.w.rule 8D of the Rules, a sum of Rs.34,08,342/-. The AO not satisfied with the correctness of the assessee’s claim of disallowance of expenses relatable to exempt income at RS.34,08,342/-, he made disallowance under Rule 8D(2)(iii) at Rs.1,84,74,465/-, after allowing rebate of suo- motto disallowance of Rs.34,08,342/- he made balance disallowance of Rs.1,50,66,123/-. Aggrieved, assessee preferred appeal before CIT(A). 4. The CIT(A) confirmed the action of AO and confirmed the addition of Rs.1,50,66,123/- apart from suo-motto disallowance made by assessee at Rs.34,08,342/-. Aggrieved, now assessee came in appeal before the Tribunal. 3 ITA No. 933/Chny/2022 5. We note the facts and admitted facts are that the assessee earned exempt income at Rs.11.47 lakhs as against which he himself computed the disallowance of expenses under Rule 8D(2) at Rs.34,08,342/-. This issue is no res integra now and settled by Hon’ble Supreme Court in the case of Maxopp Investment Ltd., vs. CIT, (2018) 402 ITR 640 (SC), wherein it is held that the disallowance under Rule 8D of the Income Tax Rules is to be restricted to the extent of exempt income. But in the present case, the assessee has suo- motto disallowed a sum of Rs.34,08,342/- which is more than the exempt income. Hence, we restrict the disallowance at Rs.34,08,342/- and delete the balance addition of Rs.1,50,66,123/- made by the AO and confirmed by the CIT(A). 6. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 10 th February, 2023 at Chennai. Sd/- Sd/- (मनोज कुमार अᮕवाल) (MANOJ KUMAR AGGARWAL) लेखा सद᭭य/ACCOUNTANT MEMBER (महावीर ᳲसह ) (MAHAVIR SINGH) उपा᭟यᭃ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 10 th February, 2023 RSR आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकर आयुᲦ (अपील)/CIT(A) 4. आयकर आयुᲦ /CIT 5. िवभागीय ᮧितिनिध/DR 6. गाडᭅ फाईल/GF.