ITAT Partially Allows Appeals on Disallowances & Interest Levies (2)

The ITAT partially allowed the appeals concerning disallowances and interest levies under different sections of the Income Tax Act for the relevant assessment years. The ITAT directed the AO to adopt a reasonable basis for disallowance under section 14A, limiting it to 2% of total exempt income. Additionally, the matter of interest levied under sections 234C and 220(2) was remitted to the AO for proper verification and consideration in accordance with the Act. The disallowance under section 94(7) was not to be included in net profit for book profit computation.

---

---

Issues:
1. Disallowance u/s 14A - ITA No. 2608/MUM/2014, AY 2006-07
2. Interest u/s 234C and 220(2) - ITA No. 2608/MUM/2014, AY 2006-07
3. Disallowance u/s 14A - ITA No. 2609/MUM/2014, AY 2010-11
4. Disallowance u/s 94(7) and Interest u/s 234C - ITA No. 2609/MUM/2014, AY 2010-11

Issue 1: Disallowance u/s 14A - ITA No. 2608/MUM/2014, AY 2006-07:
The assessee appealed against the disallowance of Rs. 32,49,904 made by the AO u/s 14A. The AO had computed the disallowance based on 0.5% of the average investment. The CIT(A) upheld the AO's computation, leading to the assessee's appeal before the ITAT. The ITAT directed the AO to adopt a reasonable basis for disallowance u/s 14A, considering the decision in Godrej & Boyce Mfg. Ltd. case. The AO then made a disallowance of Rs. 32,49,904, reducing it from the earlier disallowance. The ITAT, following relevant decisions, set aside the CIT(A)'s order and directed the AO to restrict the disallowance to 2% of the total exempt income. The 1st ground of appeal was partly allowed.

Issue 2: Interest u/s 234C and 220(2) - ITA No. 2608/MUM/2014, AY 2006-07:
The assessee contested the levy of interest u/s 234C and 220(2). The AO had levied interest despite the assessee's claims based on TDS credit. The ITAT remitted the matter to the AO for proper verification and consideration as per the provisions of the Act. The 2nd and 3rd grounds of appeal were allowed for statistical purposes.

Issue 3: Disallowance u/s 14A - ITA No. 2609/MUM/2014, AY 2010-11:
The appeal was against the disallowance of Rs. 46,43,452 u/s 14A. The AO made the disallowance under Rule 8D, which the CIT(A) upheld. The ITAT, considering relevant Supreme Court and High Court decisions, set aside the CIT(A)'s order and directed the AO to recompute the disallowance following the mentioned decisions. The 1st ground of appeal was allowed for statistical purposes.

Issue 4: Disallowance u/s 94(7) and Interest u/s 234C - ITA No. 2609/MUM/2014, AY 2010-11:
The AO disallowed Rs. 1,37,699 u/s 94(7) and levied interest u/s 234C. The CIT(A) confirmed these actions. The ITAT allowed the 3rd ground of appeal, stating that the disallowance under 94(7) should not be added to the net profit for book profit computation. The issue of interest u/s 234C was remitted to the AO for proper consideration. The 4th ground of appeal was allowed for statistical purposes.

In conclusion, the appeals were partly allowed, addressing the various issues raised by the assessee concerning disallowances and interest levies under different sections of the Income Tax Act for the respective assessment years.

---