Tribunal adjusts tax disallowance percentages, allows appeal with delay condonation.

The Tribunal partially allowed the appeal by condoning the delay in filing, adjusting the disallowance of expenditure for exempt income to 2% of exempt income, and reducing the disallowance of motor car expenses and depreciation to 25% from 33.3%.

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Issues:
1. Condonation of delay in preferring the present appeal.
2. Disallowance of expenditure under section 14A for earning exempt income.
3. Disallowance of motor car expenses and depreciation at a rate of 33.3% instead of 25%.

Analysis:

Issue 1: Condonation of Delay
The appeal was delayed by 30 days, and the assessee sought condonation of the delay, citing a genuine belief that the appeal period was 90 days. The Tribunal accepted the explanation and condoned the delay, proceeding to decide the appeal on its merits.

Issue 2: Disallowance of Expenditure for Exempt Income
The Assessing Officer observed exempt income of &8377; 32,04,703/- and disallowed &8377; 2,85,860/- under Rule 8D2(iii) of the Income Tax Rules, 1962. The CIT(A) confirmed the disallowance, stating that disallowance at 0.5% of average investment was reasonable. However, the Tribunal found that Rule 8D was not applicable for the assessment year in question. Considering the nature of investments and prior years' disallowances, a 2% disallowance of exempt income was deemed reasonable, partially allowing the appeal.

Issue 3: Disallowance of Motor Car Expenses
The AO disallowed 1/3rd of motor car expenses and depreciation at 33.3%, which the CIT(A) upheld. The Tribunal, considering the nature of the assessee's business and profession, reduced the disallowance to 25% as offered by the assessee, deeming it reasonable. Consequently, the disallowance was restricted to 25%, partially allowing the appeal.

In conclusion, the Tribunal partly allowed the appeal, condoning the delay, adjusting the disallowance of expenditure for exempt income, and reducing the disallowance of motor car expenses and depreciation to 25% from 33.3%.

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