2011 (12) TMI 6 - AT - Income Tax

Tribunal upholds Commissioner's decisions on disallowances under section 14A, Director's expenses, and VAT liability.

The Tribunal dismissed the Revenue's appeal, upholding the Ld. Commissioner of Income Tax (Appeals) decisions on disallowances under section 14A, ... Disallowance u/s 14A - assessee has shown the turnover from execution of contracts and no expense and interest attributable to the investments made by the appellant in the SPVs can be disallowed u/s 14A r.w. Rule 8D because it cannot be termed as expense /interest incurred for earning exempted income. - CIT(A) is correct in holding that disallowance of a further sum Rs. 40,556/- calculated @2% of the dividend earned is sufficient.Director’s Travelling expnses - Held that:- assessee has given sufficient details regarding the foreign travel expenditure. The disallowance in this regard cannot be sustained.VAT not paid before the due date of filing of the return - as per order of the Excise and Taxation Officer cum Assessing Authority, there was refund to the assessee instead of VAT payable - no disallowance can be made. Issues:1. Disallowance under section 14A of the Income Tax Act.2. Disallowance of Director's Travelling expenses.3. Disallowance on account of VAT liability.Disallowance under section 14A:The appeal by the Revenue was against the order of the Ld. Commissioner of Income Tax (Appeals) pertaining to the assessment year 2008-09. The Assessing Officer disallowed expenses related to exempt income under section 14A r.w. Rule 8D amounting to Rs. 35,85,121/-. The Ld. Commissioner of Income Tax (Appeals) considered the issue and upheld the disallowance of Rs. 3,37,287/-, calculated @ 2% of the dividend earned. The Revenue appealed this decision. The Tribunal found that the Ld. Commissioner of Income Tax (Appeals) correctly analyzed the situation and upheld the disallowance, finding no infirmity in the order.Disallowance of Director's Travelling expenses:The Assessing Officer disallowed foreign travel expenses amounting to Rs. 3,37,040/- as no correspondence or material was submitted to support the business expense claim. The Ld. Commissioner of Income Tax (Appeals) reviewed the details provided by the assessee, including a detailed chart with supporting documents, and held that the expenses were incurred for the business purpose of the assessee. The Revenue appealed this decision. The Tribunal upheld the order of the Ld. Commissioner of Income Tax (Appeals), stating that the assessee had provided sufficient details regarding the foreign travel expenditure, and the disallowance could not be sustained.Disallowance on account of VAT liability:The Assessing Officer noted that VAT liability of Rs. 1,51,200/- was not paid by the assessee before the due date of filing the return. The Ld. Commissioner of Income Tax (Appeals) considered the submissions of the assessee, which included details regarding the VAT liability and the refund due to the assessee as per legal opinion. The Ld. Commissioner of Income Tax (Appeals) accepted the contention of the assessee that no disallowance was called for in this regard, as confirmed by the Excise and Taxation Officer cum Assessing Authority. The Revenue appealed this decision. The Tribunal upheld the order of the Ld. Commissioner of Income Tax (Appeals), stating that no disallowance was warranted based on the facts presented.In conclusion, the Tribunal dismissed the appeal filed by the Revenue, upholding the orders of the Ld. Commissioner of Income Tax (Appeals) on all three issues.