Tribunal upholds CIT(A)'s decision on disallowance under section 14A

The Tribunal upheld the CIT(A)'s decision to delete the disallowance under section 14A read with Rule 8D. The Tribunal dismissed the revenue's appeal and agreed with the CIT(A)'s reasoning based on the assessee's own case precedent. Regarding the disallowance of Courtesies & Entertainment Expenses, the Tribunal set aside the CIT(A)'s order and directed the AO to re-examine the matter considering all relevant facts, allowing both the revenue's and the assessee's appeals for statistical purposes.

---

---

Issues involved: Two cross-appeals filed by the revenue and the assessee against the order dated 28.10.2011 of CIT(A)-XV, New Delhi pertaining to 2007-08 assessment year.

Issue 1 - Disallowance u/s 14A read with Rule 8D:
The revenue challenged the deletion of addition of Rs. 1,50,000 made on account of disallowance u/s 14A read with Rule 8D of the I.T. Rules, 1962. The Ld. Sr. DR argued that expenses on interest-free income should be disallowed, but the assessee contended that no expenses were incurred to earn the exempt income u/s 10(23)(G). The CIT(A) granted relief based on the Tribunal's order in the assessee's own case for AY 2004-05. The AR relied on consistent views favoring the assessee in various cases. The Tribunal agreed with the CIT(A) and dismissed the department's ground.

Issue 2 - Disallowance of Courtesies & Entertainment Expenses:
The revenue and the assessee appealed against the disallowance of Rs. 47,30,967 out of the total expenses of Rs. 1,62,66,000 under the head Courtesies and Entertainment Expenses. The CIT(A) restricted the disallowance to Rs. 10,00,000 based on past history, but the revenue contended that proper vouchers and details were lacking. The AR argued against sustaining the disallowance, mentioning the fringe benefit tax paid on a major portion of the expenses. The Tribunal set aside the impugned order, directing the AO to examine double taxation issues and decide the matter after considering all relevant facts. Both the revenue's and the assessee's grounds were allowed for statistical purposes.

The judgement was pronounced on 21st June 2013 by SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI T.S.KAPOOR, ACCOUNTANT MEMBER.

---