Revenue appeal dismissed, relief upheld under Income-tax Act. Assessee's cross objection allowed for education cess.

The Tribunal dismissed the Revenue's appeal, upholding relief granted by the Commissioner on disallowances under sections 36(1)(viii) and 14A of the Income-tax Act. The Tribunal also allowed the assessee's cross objection for statistical purposes regarding deduction for education cess and higher and secondary education cess, remanding the issue for further verification. The decision was rendered on August 24, 2021.

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Issues:
1. Disallowance under section 36(1)(viii) of the Income-tax Act, 1961.
2. Disallowance under section 14A of the Income-tax Act read with Rule 8D.
3. Entitlement of the assessee for deduction in respect of education cess and higher and secondary education cess.

Analysis:

1. Disallowance under section 36(1)(viii) of the Income-tax Act, 1961:
The issue revolved around the disallowance of Rs.1,88,65,937 under section 36(1)(viii) of the Income-tax Act. The Assessing Officer made this disallowance based on the amount transferred to special reserve. However, the Commissioner of Income Tax (Appeals) consistently granted relief on this issue for several assessment years, including the present one. The Tribunal also upheld the relief granted by the Commissioner for the assessment years 2009-10 and 2010-11. The Tribunal noted that the methodology adopted by the assessee was consistently followed and accepted by the revenue without objection. Given the consistent view taken by the authorities and the absence of any change in facts or law, the Tribunal dismissed the Revenue's appeal on this ground.

2. Disallowance under section 14A of the Income-tax Act read with Rule 8D:
Regarding the disallowance of Rs.3,87,94,000 by invoking the provisions of section 14A read with Rule 8D, the Commissioner of Income Tax (Appeals) found that no dividend was earned by the assessee on the investments considered by the Assessing Officer. The Commissioner relied on a binding precedent and deleted the addition. The Tribunal found no fault with the Commissioner's findings, as it was not established that the findings were incorrect. Therefore, the Tribunal dismissed the Revenue's appeal on this ground as well.

3. Entitlement of the assessee for deduction in respect of education cess and higher and secondary education cess:
The assessee filed cross-objections claiming entitlement to a deduction for education cess and higher and secondary education cess paid during the year. The assessee relied on a decision of the Hon'ble Bombay High Court and requested relief. The Departmental Representative argued that this plea was not raised before the lower authorities and requested verification of facts. The assessee had no objection to this verification. The Tribunal left the issue open to be adjudicated before the Assessing Officer and remanded the issue for verification and decision in accordance with the law.

In conclusion, the Tribunal dismissed the Revenue's appeal, upheld the relief granted by the Commissioner on both disallowances, and allowed the assessee's cross objection for statistical purposes. The decision was pronounced on August 24, 2021.

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