Appellate Tribunal clarifies disallowance of expenses under IT Act, 1961

The Appellate Tribunal ITAT Kolkata resolved a disagreement among its members on the disallowance of expenses under section 14A of the I.T. Act, 1961. The Third Member, concurring with the Accountant Member, upheld that the disallowable amount should be 1% of the total exempt income for the assessment year, as Rule 8D was deemed not applicable. Consequently, the Department's appeal was dismissed, and the Cross Objection of the assessee was allowed in the matter.

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Issues involved: Difference of opinion between members on disallowance of expenses u/s 14A of the I.T. Act, 1961.

Summary:
The Appellate Tribunal ITAT Kolkata dealt with a matter where there was a disagreement between the members regarding the disallowance of expenses under section 14A of the I.T. Act, 1961. The issue was whether to disallow expenses on an ad hoc basis or as a percentage of total exempted income. The Third Member, nominated by the Hon'ble President, concurred with the findings of the Accountant Member. It was observed that Rule 8D was not applicable for the assessment year in question, and the Tribunal could not estimate the disallowable amount differently from what was done by the Assessing Officer. The Tribunal upheld that the amount disallowable u/s 14A should be 1% of the total exempt income. As a result, the Department's appeal was dismissed, and the Cross Objection of the assessee was allowed. The order was pronounced in the Open Court on 10.06.2011.

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