2013 (2) TMI 664 - AT - Income Tax

Tribunal upholds Commissioner (Appeals) decision on Income Tax Act disallowance.

The Tribunal upheld the Commissioner (Appeals)'s decision, dismissing the Revenue's appeal regarding the disallowance under section 14A of the Income Tax ... Disallowance u/s 14A r.w.r. 8D - Held that:- Provisions of Rule 8D, are not applicable in assessment year 2007-08 in view of the judgment of Godrej & Boyce Mfg. Co. Ltd. v/s DCIT, (2010 (8) TMI 77 - BOMBAY HIGH COURT); and secondly, the disallowance @ 10% of the dividend income can be said to be a reasonable basis on the facts fo the case. Therefore, we do not find any reason to deviate from such a finding given by the learned Commissioner (Appeals). There is no merit in the ground raised by the Revenue which is mainly on the ground that the judgment of the Hon'ble Jurisdictional High Court in Godrej & Boyce Mfg. Co. Ltd. (supra) has not been accepted by the Department and Special Leave Petition is pending before the Apex Court. Thus, such a ground raised by the Revenue cannot be sustained and accordingly the same is dismissed. - Decided against revenue. Issues:1. Disallowance under section 14A of the Income Tax Act, 1961 for the assessment year 2007-08 based on the applicability of Rule 8D.Analysis:The appeal before the Appellate Tribunal ITAT Mumbai concerned the disallowance under section 14A of the Income Tax Act, 1961 for the assessment year 2007-08. The Assessing Officer had calculated a disallowance of &8377; 76,15,743 under section 14A based on the provisions of Rule 8D, as the assessee declared dividend income and long-term capital gains from the sale of shares as exempt. However, the Commissioner (Appeals) held that Rule 8D could not be applied for the said assessment year. Instead, the Commissioner directed a reasonable deduction, considering the assessee's offer of &8377; 10,000 as a reasonable amount to be disallowed under section 14A. The disallowance was then restricted to 10% of the dividend income earned, deemed as a reasonable expenditure attributable to earning the said income.Upon considering the arguments presented, the Tribunal concurred with the Commissioner (Appeals) on two main points. Firstly, the Tribunal agreed that Rule 8D was not applicable for the assessment year 2007-08, citing the judgment of the Jurisdictional High Court in Godrej & Boyce Mfg. Co. Ltd. v/s DCIT. Secondly, the Tribunal found the 10% disallowance of the dividend income to be reasonable in this case. The Tribunal dismissed the Revenue's appeal, emphasizing that the argument challenging the acceptance of the High Court's judgment by the Revenue was not sustainable. The Tribunal held that the Revenue's ground for appeal was not valid, especially considering the pending Special Leave Petition before the Apex Court regarding the High Court's decision.In conclusion, the Tribunal upheld the Commissioner (Appeals)'s decision, dismissing the Revenue's appeal and affirming the reasonable basis for the disallowance under section 14A for the assessment year 2007-08.