Appeal dismissed due to tax effect below limit, clarifies Tribunal on exclusion of surcharge & education cess.

The appeal filed by the Revenue against the disallowance under section 14A of the Income Tax Act, 1961 was dismissed by the Tribunal due to the tax effect being below the specified monetary limit of &8377; 10.00 lacs as per CBDT Circular No.21/2015. The disputed amount was &8377; 32,87,971, with a tax effect of &8377; 9,86,391, excluding surcharge and education cess. The Tribunal clarified that the tax effect should be calculated excluding surcharge and education cess. As a result, the appeal was deemed not maintainable, and the order was pronounced on 31/05/2017.

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Issues:
- Disallowance under section 14A of the Income Tax Act, 1961
- Tax effect involved in the appeal

Analysis:
- The appeal filed by the Revenue was against an order passed by the CIT(A)-47, Mumbai, arising from an order by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 for the assessment year 2010-11.
- The main issue raised by the Revenue in the appeal was regarding the disallowance of &8377; 33,67,807 under section 14A of the Income Tax Act, 1961. The Revenue argued that the CIT(A) was not justified in deleting the disallowance, emphasizing the mandatory nature of the disallowance under section 14A read with rule 8D from A.Y. 2008-09 onwards.
- During the hearing, it was pointed out that the tax effect involved in the appeal was less than &8377; 10.00 lacs as per the CBDT Circular No.21/2015, which revised the monetary limits for filing appeals by the Department before the Tribunal retrospectively. The Department did not dispute this fact.
- The Assessing Officer had initially disallowed &8377; 33,67,807 under section 14A, which was later restricted to &8377; 79,836 by the CIT(A). The disputed amount in the appeal was &8377; 32,87,971, with a tax effect of &8377; 9,86,391, excluding surcharge and education cess. The Tribunal referred to a previous case to clarify that the tax effect should be calculated excluding surcharge and education cess.
- Since the tax effect in dispute was below the monetary limit of &8377; 10.00 lacs specified in the CBDT Circular, the appeal was dismissed as not maintainable. Consequently, the appeal of the Revenue was dismissed, and the order was pronounced in the presence of both parties on 31/05/2017.

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