Case Number: ITA 647/DEL/2019
Appellant: Competent Holdings Pvt. Ltd., New Delhi
Respondent: ACIT, Circle-6(1), New Delhi
Assessment Year: 2014-15
Result: Partly Allowed
Case Filed On: 2019-01-30
Order Type: Final Tribunal Order
Date of Order: 2022-02-15
Pronounced On: 2022-02-15
The case of Competent Holdings Pvt Ltd vs ACIT in the Income Tax Appellate Tribunal (ITAT) for the assessment year 2014-15 involves the disallowance of expenses under Section 14A of the Income Tax Act. This article provides an in-depth analysis of the case, the proceedings, and the final judgment that led to a partial allowance of the appeal.
Competent Holdings Pvt Ltd, the appellant in this case, had filed an appeal against the order of the learned Commissioner of Income Tax (Appeals)-33, New Delhi [CIT(A)], dated 13.09.2018, for the assessment year 2014-15. The dispute arose due to the disallowance of Rs.577,221 made under Section 14A of the Income Tax Act, which pertains to expenses incurred in relation to income not includible in total income, i.e., exempt income.
The appeal was heard by the ITAT Bench ‘B’, New Delhi, comprising Shri N. K. Billaiya, Accountant Member, and Shri Yogesh Kumar US, Judicial Member. The hearing was conducted through video conferencing due to the ongoing pandemic restrictions. The case was heard and the order was pronounced on 15.02.2022.
The appellant, Competent Holdings Pvt Ltd, earned dividend income of Rs.997,226, which was claimed as exempt under Section 10(34) of the Income Tax Act. During the scrutiny assessment proceedings, the assessee was asked to explain why the disallowance under Section 14A should not be made. The assessee stated that the dividend income was earned from shares held as stock-in-trade, duly reflected in its financial statements. However, the Assessing Officer (AO) did not accept this explanation and proceeded to compute the disallowance under Section 14A read with Rule 8D, making an addition of Rs.577,221.
The assessee contested this disallowance before the CIT(A), but without success. The matter was then brought before the ITAT.
The counsel for the assessee drew attention to the decision of the Tribunal in the assessee’s own case for the assessment year 2013-14, where on identical facts, the Tribunal had deleted the disallowance. The Departmental Representative (DR) placed strong reliance on the orders of the authorities below but could not bring any distinguishing decision in favor of the revenue.
After considering the submissions and examining the material on record, the ITAT found that the disallowance made in the assessment year 2013-14 was on identical facts and had been deleted by the Tribunal. The relevant findings of the coordinate Bench were followed, and it was directed that the AO restrict the disallowance to Rs.99,722, being 10% of the exempt income.
In conclusion, the ITAT’s decision in the case of Competent Holdings Pvt Ltd vs ACIT for the assessment year 2014-15 highlights the importance of consistency in judicial decisions and the application of legal precedents. The partial allowance of the appeal, restricting the disallowance to 10% of the exempt income, underscores the need for a balanced approach in disallowance computations under Section 14A. This case serves as a reference for similar disputes, emphasizing the significance of following judicial precedents and ensuring fair assessment practices.
Order pronounced in the open court on 15.02.2022 by the Judicial Member Shri Yogesh Kumar US and the Accountant Member Shri N. K. Billaiya.
Source: Income Tax Appellate Tribunal, Delhi Bench ‘B’, New Delhi
Disclaimer: This article provides a general overview of the case and is not a substitute for professional legal advice. For detailed information, readers are encouraged to refer to the official case documents and consult with a qualified legal professional.
Competent Holdings Pvt Ltd vs ACIT: Tax Dispute for AY 2014-15 and Section 14A Disallowance
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