Disallowance of expenditure in relation to exempt income u/s.14A r.w. Rule 8D


Quick Summary
The Income Tax Appellate Tribunal (ITAT), Chennai Bench, has ruled on an appeal concerning the disallowance of expenditure under Section 14A read with Rule 8D. The assessee argued that disallowance was incorrect as they had sufficient own funds exceeding their investments. The Tribunal allowed the appeal for statistical purposes.

Court :
ITAT Chennai

Brief :
This appeal filed by the assessee is directed against order of the learned CIT(A)-9, Chennai dated 24.07.2019 and pertains to assessment year 2015-16.

Citation :
I.T.A.No.2824/Chny/2019

IN THE INCOME TAX APPELLATE TRIBUNAL , ‘C’ BENCH, CHENNAI

BEFORE SHRI V.DURGA RAO , JUDICIAL MEMBER
AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER

I.T.A.No.2824/Chny/2019

Assessment Year : 2015-16

M/s. Manali Petro Chemicals Ltd.
Spic House, 88 Mount Road,
Guindy, Chennai -600 032

PAN: AAACM 3404D

Appellant

vs

The Deputy Commissioner of
Income Tax,
Large Tax Payer Unit-1
Chennai

Respondent

Appellant by : Mr.R.Vijayaraghavan

Respondent by : Mr. G.Johnson, Addl.CIT

Date of hear ing : 14.07.2021

Date of Pronouncement : 28.07.2021

O R D E R

This appeal filed by the assessee is directed against order of the learned CIT(A)-9, Chennai dated 24.07.2019 and
pertains to assessment year 2015-16.

2.Brief facts of the case are that the assesse company is engaged in the business of manufacturing and trading of petro
chemical products filed its return of income for assessment year 2015-16 on 30.11.2015 by declaring total income of
Rs.97,97,73,029/-.

3.The first issue that came up for our consideration from ground no.2 of assessee appeal is disallowance of expenses
u/s.14A r.w. Rule 8D of the Income Tax Rules, 1962. The learned A.R for the assessee submitted that the learned CIT(A)
has erred in confirming disallowance of expenses u/s.14A r.w. Rule 8D without appreciating fact that the assessee has
sufficient own funds being share capital and reserves in excess of investments made in shares and securities and consequently, no disallowance can be made towards interest expenditure.

4.We have heard both the parties, perused materials available on record and gone through orders of the authorities below.

5.In the result, appeal filed by the assessee is treated as allowed for statistical purposes.
Order pronounced in the open court on 28th July, 2021

Please find attached the enclosed file for the full judgement

FAQ :

The main issue is the disallowance of expenditure under Section 14A of the Income Tax Act, read with Rule 8D, concerning exempt income.

The assessee argued that the disallowance was incorrect because they possessed sufficient own funds, such as share capital and reserves, which exceeded their investments in shares and securities, meaning no interest expenditure should be disallowed.

The appeal filed by the assessee was allowed for statistical purposes.

This ruling pertains to the assessment year 2015-16.

 
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