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of <h1>ITAT Decision: Disallowance under Section 14A & Rule 8D, Interest Deletion under Sections 234B & 234C</h1> <h3>Commissioner of Income Tax Vadodara-2 Versus National Dairy Development Board</h3> Commissioner of Income Tax Vadodara-2 Versus National Dairy Development Board - [2017] 397 ITR 543 Issues:1. Whether the ITAT was justified in restricting the disallowance made under section 14A r.w.r 8D of the I.T. ActRs.2. Whether the ITAT was justified in deleting interest under sections 234B and 234C of the I.T. ActRs.Analysis:Issue 1:The first issue pertains to the ITAT's decision regarding the disallowance made under section 14A r.w.r 8D of the I.T. Act. The question raised was whether the ITAT was correct in limiting the disallowance to a specific amount without considering the applicability of Rule 8D(2)(iii) to the assessee. The Tribunal's decision was based on the interpretation of the relevant provisions and the specific circumstances of the case.Issue 2:The second issue revolves around the ITAT's ruling on the deletion of interest under sections 234B and 234C of the I.T. Act. The dispute arose due to a retrospective amendment to Section 43(6) of the Income Tax Act, 1961, which resulted in a shortfall in the advance tax payment by the assessee. The Tribunal, relying on precedents, held that interest cannot be levied under these sections in such a scenario.The retrospective amendment introduced by the Finance Act 2008 impacted the computation of advance tax liability for the assessee. The Tribunal's decision was influenced by judgments from the Kolkata High Court and Uttaranchal High Court, emphasizing that interest cannot be charged in situations where the tax liability arose due to a subsequent retrospective amendment.The legal analysis delves into the provisions of Section 207 and related sections of the Income Tax Act, highlighting the conditions for the liability to pay advance tax and the computation thereof. The judgment underscores that the law does not expect individuals to perform the impossible, especially in cases where tax liabilities emerge retrospectively.The Division Bench of the Kolkata High Court's decision in a similar case provided a precedent for the Tribunal's ruling, emphasizing that the liability to pay interest arises only on default and should not be considered a form of punishment, especially in instances where tax liabilities are a result of retrospective legal changes.In conclusion, the second question regarding interest under sections 234B and 234C was not entertained, and the tax appeal was limited to the first question concerning the disallowance under section 14A r.w.r 8D of the I.T. Act.
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