2016 (3) TMI 1351 - AT - Income Tax

Tribunal remands disallowance under Income Tax Act, directing application of precedent. Appellant succeeds on all grounds.

The Tribunal remanded the disallowance u/s 14A read with Rule 8D of the Income Tax Act for the assessment year 2009-2010 back to the Assessing Officer, ... Disallowance under section 14A read with Rule 8D - Reasonable allocation of expenditure attributable to tax-free income - Application of ratio/precedent on remand - Natural justice - opportunity of hearingDisallowance under section 14A read with Rule 8D - Reasonable allocation of expenditure attributable to tax-free income - Application of ratio/precedent on remand - Natural justice - opportunity of hearing - Remand to the Assessing Officer to decide the correctness and quantum of disallowance under section 14A read with Rule 8D in accordance with the Tribunal's earlier ratio and other binding decisions, after affording the assessee an opportunity of being heard. - HELD THAT: - The Tribunal noted that its earlier decision in the assessee's own case for AY 2008-2009 applied a principle of reasonable allocation of expenditure to income chargeable to tax and restricted the disallowance to the amount worked out by the assessee. In the present appeals (AY 2009-2010) the Tribunal accepted the assessee's submission that the disallowance made by the AO exceeded the P&L expenditure and observed that the earlier ratio is material. Rather than adjudicating the quantum afresh, the Tribunal remanded the matter to the AO to apply the ratio of the Tribunal's earlier order and other decisions in force, directing the AO to reconsider the disallowance in accordance with law and to grant the assessee a reasonable opportunity of hearing before finalizing the disallowance. [Paras 4, 5]Matter remitted to the AO for fresh consideration in accordance with the Tribunal's earlier ratio and other binding decisions; assessee to be heard; appeals allowed for statistical purposes.Final Conclusion: Both cross appeals relating to disallowance under section 14A read with Rule 8D for AY 2009-2010 are remitted to the Assessing Officer to apply the Tribunal's earlier ratio and other binding decisions, after affording the assessee an opportunity of hearing; appeals disposed of for statistical purposes. Issues: Disallowance u/s 14A read with Rule 8D of the Income Tax Act for the assessment year 2009-2010.Analysis:- The appeals under consideration are cross appeals against the order of the CIT (A)-4, Mumbai dated 28.8.2012, both related to the disallowance u/s 14A read with Rule 8D of the Act for the assessment year 2009-2010. The issues raised in these appeals are interconnected and are clubbed together for convenience.- The main issue raised in both appeals pertains to the disallowance u/s 14A read with Rule 8D of the Act. The Counsel for the assessee argued that the disallowance made by the AO exceeded the total claim of expenditure in the Profit & Loss Account. Reference was made to a Tribunal order in the assessee's own case for the AY 2008-2009 where relief was granted. The Counsel suggested that the issue may be remanded to the AO for further consideration based on previous judgments and the Tribunal's decision in the AY 2008-2009 case.- After hearing both parties, the Tribunal found the para 5 of the Tribunal's order in the assessee's own case for the AY 2008-2009 to be relevant. The Tribunal agreed with the Counsel's argument and decided to remand the matter to the AO. The AO was directed to apply the same ratio as in the AY 2008-2009 case and other relevant decisions, if any, to decide the issue in accordance with the law. The AO was instructed to provide a reasonable opportunity for the assessee to be heard as per the principles of natural justice.- Based on the above analysis, the Tribunal allowed all grounds raised in both cross appeals for statistical purposes, and both cross appeals were allowed. The order was pronounced in the open court on 31st March 2016.