Tribunal upholds disallowance of expenditure under Income Tax Act

The Tribunal upheld the disallowance of expenditure under section 14A of the Income Tax Act, 1961 for the assessment year 2008-09. The Commissioner (Appeals) provided partial relief by excluding depreciation from the disallowance, reducing the amount by Rs. 7,22,000. The Tribunal affirmed the disallowance, emphasizing the substantial exempt income earned by the assessee and the need to examine expenses claimed in the Profit & Loss account. Consequently, the Tribunal dismissed the assessee's appeal, upholding the disallowance of expenditure under section 14A.

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Issues involved: Challenge to impugned order u/s 143(3) for disallowance of expenditure u/s 14A of the Income Tax Act, 1961.

Facts: The assessee, a non-banking finance company, earned exempt dividend income of Rs. 13,89,40,620 for the assessment year 2008-09. The assessee disallowed Rs. 9,00,907 for earning the exempt income. The Assessing Officer calculated disallowance u/r 8D at Rs. 1,22,90,682. Additional disallowance of Rs. 15,11,000 was made due to the huge fund managed by the assessee.

Decision: The learned Commissioner (Appeals) excluded depreciation from disallowance, providing relief of Rs. 7,22,000. The Tribunal confirmed the disallowance, stating that once rule 8D is found excessive, the expenditure claimed in the Profit & Loss account must be examined for disallowance. The Tribunal upheld the disallowance, considering the substantial exempt income earned by the assessee from fund deployment.

Conclusion: The Tribunal dismissed the assessee's appeal, confirming the disallowance of expenditure u/s 14A.

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