2014 (9) TMI 1042 - HC - Income Tax

Dismissal of Appeal Against Disallowance under Section 14A of Income Tax Act

The Commissioner of Income Tax-2, Mumbai Versus HDFC Bank Ltd.

The appeal challenging the disallowance under section 14A of the Income Tax Act for assessment years 2006-07 and 2007-08 was dismissed by the High Court. ... Disallowance u/s 14A r.w.r. 8D - whether ITAT was correct in law in setting aside the disallowance made u/s.14A by relying on the decision of the Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. V/s. DCIT (2010 (8) TMI 77 - BOMBAY HIGH COURT), when the department has not accepted the principles laid own by the said decision as evidenced by the SLP filed ? Held that:- A similar issue had arisen in Income Tax Appeal in the case of the same assessee [2014 (8) TMI 119 - BOMBAY HIGH COURT] and after considering all these questions, this Court vide order dated 23rd July, 2014 to which one of us (S.C.Dharmadhikari, Jther .) was a party, did not find any merit in the appeal. - Decided in favour of assessee Issues:1. Disallowance under section 14A of the Income Tax Act, 1961.2. Interpretation of legal principles and judgments.3. Entitlement for deduction based on RBI guidelines.Analysis:1. The appeal filed by the department challenges the order of the Income Tax Appellate Tribunal regarding disallowance under section 14A of the Income Tax Act for assessment years 2006-07 and 2007-08. The Respondent-assessee questioned the disallowance made by the assessing officer, and the revenue raised certain issues. The Tribunal allowed the appeal filed by the assessee and dismissed the appeal filed by the revenue on 21st February, 2012.2. The appellant raised substantial questions of law regarding the correctness of the Tribunal's decision. The first issue questioned whether the Tribunal was correct in setting aside the disallowance under section 14A based on a previous judgment when the department had not accepted the principles laid down in that judgment. The second issue raised was about the Tribunal's reliance on a judgment where the operation of Rule 8D was made prospective, despite the method of disallowance in Rule 8D being accepted as reasonable in the same judgment. The third issue questioned the correctness of the Tribunal in allowing deduction based on RBI guidelines, disregarding a Supreme Court decision.3. The Court, after considering the appellant's arguments, found no merit in the appeal. It was noted that a similar issue had been addressed in a previous case involving the same assessee, where no substantial question of law was found to have arisen. As the facts of the current case were similar to the previous one, the Court concluded that no justification existed for interfering with the Tribunal's order. Therefore, the appeal was dismissed with no order as to costs.