ITAT Pune remits Section 14A disallowance issue for verification.

The Appellate Tribunal ITAT Pune allowed the appeal of the assessee for statistical purposes, remitting the issue of disallowance under section 14A r.w. Rule 8D(2)(iii) back to the Assessing Officer for verification and appropriate action in line with relevant legal precedents.

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Issues:
Disallowance under section 14A of the Income Tax Act r.w. Rule 8D(2)(iii) for the assessment year 2010-11.

Analysis:
The appeal before the Appellate Tribunal ITAT Pune concerned the disallowance of Rs. 10,92,618 under section 14A of the Income Tax Act r.w. Rule 8D(2)(iii) for the assessment year 2010-11. The assessee, a partnership firm engaged in real estate development business, challenged the disallowance made by the Assessing Officer before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) deleted the disallowance made under Rule 8D(2)(ii) but confirmed the disallowance of Rs. 10,92,618 under Rule 8D(2)(iii). The assessee argued that the disallowance cannot exceed the actual expenditure incurred for earning exempt income, pointing out that a significant portion of the indirect expenditure debited to the Profit & Loss Account was unrelated to earning exempt income. The assessee relied on various judgments to support their position.

The Department, represented by Shri Aseem Sharma, defended the order of the Commissioner of Income Tax (Appeals) and sought the dismissal of the appeal. After hearing both sides and examining the submissions and orders, the Tribunal observed that the only issue in the appeal was the confirmation of the disallowance of Rs. 10,92,618 under section 14A r.w. Rule 8D(2)(iii). The assessee contended that the disallowance should be limited to the expenditure debited to the Profit & Loss account related to earning exempt income. The Tribunal noted that the Commissioner of Income Tax (Appeals) did not consider the submissions regarding the indirect expenditure provided by the assessee.

Referring to relevant case law, including Gillette Group India (P.) Ltd. Vs. Assistant Commissioner of Income Tax, the Tribunal agreed in principle with the assessee's contention. However, the Tribunal found the need for verification of the indirect expenditure highlighted by the assessee. Therefore, the Tribunal remitted the issue back to the Assessing Officer for further examination and directed to make the disallowance under section 14A in accordance with the decisions cited. The appeal of the assessee was allowed for statistical purposes.

In conclusion, the Appellate Tribunal ITAT Pune allowed the appeal of the assessee for statistical purposes, remitting the issue of disallowance under section 14A r.w. Rule 8D(2)(iii) back to the Assessing Officer for verification and appropriate action in line with relevant legal precedents.

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