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2024 (5) TMI 731 - ITAT CHANDIGARHDisallowance u/s 40(a)(ia) - TDS was not deducted on the interest paid - assessee had not filed the Form 26A before the Director General of Income Tax (Systems) - CIT(A) deleted the disallowance, observing that since the recipients of the interest had included the same in their total income and had paid taxes thereon, the assessee could not be held as an assessee in default - HELD THAT:- Apropos the question of non-furnishing of Form 26A before the Director General of Income Tax (Systems), we find that the ld. CIT(A) has correctly placed reliance on the decision of Jai Mata Di [2018 (5) TMI 1481 - ITAT CUTTACK] wherein as held that for non-filing of Form 26A before the Director General of Income Tax (Systems), the assessee can be visited with penalty as provided under the Income Tax Act, but no disallowance of the expenditure can be made u/s 40(a)(ia) of the Act. Thus we hold that the assessee cannot be put to disallowance u/s 40(a)(ia) of the Act, holding it to be a person in default, particularly when the AO has not called into question the contents of the Forms 26A. For the mere reason of non-filing of Form 26A before the Director General of Income Tax (Systems) also, where the payee has filed its return of income disclosing the payment received by it and has also paid tax thereon. Accordingly, finding no merit therein, ground Nos. 1 & 2 are rejected, upholding the order passed by the ld. CIT(A) on this issue. Disallowance u/s 14A r.w.r 8D - Disallowance was suo-moto by the assessee - CIT(A) agreed with the assessee's contention that the disallowance u/s 14A of the Act cannot exceed the amount of exempt income earned by the assessee - HELD THAT:- As decided in M/s SEL Manufacturing Co. Ltd [2019 (2) TMI 2057 - ITAT CHANDIGARH] disallowance u/s 14A cannot exceed the total exempt income earned by the assessee during the year. No contrary decision has been brought to our notice. We direct that the disallowance u/s 14A of the Act should be restricted which is the amount of dividend income earned by the assessee during the year under consideration. Decided in favour of assessee.
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