Case Number: ITA 1043/DEL/2021
Appellant: Sudhir Power Ltd., New Delhi
Respondent: DCIT, Circle-4, New Delhi
Assessment Year: 2017-18
Result: 2017-18
Case Filed on: 2021-09-02
Order Type: Final Tribunal Order
Date of Order: 2023-08-30
Pronounced on: 2023-08-30
The case of Sudhir Power Ltd., New Delhi versus DCIT, Circle-4, New Delhi revolves around the disallowance under section 14A of the Income Tax Act for the assessment year 2017-18. The appellant, Sudhir Power Ltd., challenged the addition made by the Assessing Officer (AO) and upheld by the CIT(A), regarding the disallowance of expenses incurred in relation to earning exempt income.
Sudhir Power Ltd., engaged in the business of manufacturing, erecting, and commissioning various power-related equipment, filed its return of income for the assessment year 2017-18. The assessee earned exempt income of Rs.2,83,59,262/- and made a suo moto disallowance of Rs.6,68,594/- under section 14A in its return of income, considering the salary of employees who manage investments.
The AO, however, disregarded the suo moto disallowance and applied the computation mechanism under Rule 8D(2) of the Income Tax Rules, resulting in a higher disallowance. The CIT(A) upheld this disallowance, leading to the present appeal before the ITAT, Delhi.
The grounds raised by the appellant for the assessment year 2017-18 were as follows:
1. The CIT(A) erred in observing that the AO had recorded satisfaction regarding the incorrectness of the suo moto disallowance made by the assessee.
2. The CIT(A) erred in confirming the disallowance under the second and third limb of Rule 8D(2) of the Rules.
3. The AO did not record objective satisfaction as required under section 14A(2) of the Act.
The Tribunal reviewed the submissions and materials on record. It noted that the AO did not record objective satisfaction regarding the incorrectness of the suo moto disallowance made by the assessee, which is a prerequisite under section 14A(2) of the Act. The Tribunal referred to the judgment of the Hon’ble Supreme Court in the case of Maxopp Investment Ltd. vs. CIT (402 ITR 640) and held that the disallowance made by the AO without recording proper satisfaction was invalid.
The Tribunal allowed the appeal filed by Sudhir Power Ltd. for the assessment year 2017-18. The disallowance under section 14A made by applying Rule 8D(2) was deleted, and the grounds raised by the Revenue were dismissed.
In conclusion, the ITAT, Delhi Bench, provided a fair judgment by allowing the appeal of Sudhir Power Ltd. The disallowance under section 14A was deleted, ensuring adherence to the legislative intent and judicial precedents for the assessment year 2017-18.
Pronounced in the open court on 30th August 2023.
Signed:
(M. BALAGANESH)
Accountant Member
Signed:
(ANUBHAV SHARMA)
Judicial Member
Dated: 30th August 2023
Copy forwarded to:
Asstt. Registrar, ITAT, New Delhi
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