Appellate Tribunal directs reassessment of disallowed expenses under section 14A

The Appellate Tribunal set aside the disallowance of interest and other expenditure under section 14A and directed the Assessing Officer to recompute the disallowance in accordance with a decision of the Bombay High Court. The appeals by the assessee were partly allowed, with the matter being referred back to the Assessing Officer for recomputation.

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Issues involved: Appeal against order of learned CIT(A)-XXX, Mumbai regarding disallowance of interest and other expenditure u/s. 14A and direction to recompute disallowance as per Rule 8D for A.Y. 1998-99 and 1999-2000.

Summary:

Issue 1: Disallowance of interest and other expenditure u/s. 14A

The appeals were filed by the assessee company against the order of learned CIT(A)-XXX, Mumbai pertaining to A.Y. 1998-99 and 1999-2000. The common ground in both appeals was that the learned CIT(A) erred in confirming the disallowance of interest and other expenditure u/s. 14A and in directing the Assessing Officer to recompute the disallowance as per Rule 8D of the Income Tax Rules.

Issue 2: Recomputation of disallowance u/s. 14A

Both the Assessing Officer and the learned CIT(A) determined that the computation of disallowance should be done u/s. 14A of the Income Tax Act in conjunction with Rule 8D. The counsel for the assessee referred to a decision of the Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd., ITA No. 626 of 2010 dated 12.8.2010, and argued that the matter needed to be reconsidered in accordance with the law. The learned DR did not object to this submission.

Conclusion:

After considering the facts of the case, the Appellate Tribunal deemed it fair and reasonable to set aside the issue to the file of the Assessing Officer. The Assessing Officer was directed to recompute the amount disallowable u/s. 14A in line with the decision of the Hon'ble Bombay High Court. As a result, the appeals filed by the assessee were treated as partly allowed. The order was pronounced on the 1st day of November, 2010.

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