Appellate tribunal remands matter for reconsideration on disallowance under Sections 14A & 115JB

The appellate tribunal remanded the matter to the Assessing Officer for reconsideration in both Assessment Years (AY) 2012-13 and 2014-15 regarding the quantum of disallowance under Section 14A and its adjustment for Book Profits under Section 115JB. The tribunal emphasized the importance of proper opinion formation before applying Rule 8D for disallowance and highlighted the necessity of disallowing expenses related to investments. The decisions were in favor of the appellant for statistical purposes, allowing them to present their case before the AO.

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Issues:
Quantum of disallowance u/s 14A and adjustment while computing Book Profits u/s 115JB.

Analysis:
*For AY 2012-13:*
The appellant contested the disallowance of &8377; 40,55,723 u/s 14A r.w.r. 8D, arguing that the investments were for business purposes. The disallowance was added to the total income, but the appellant requested it to be reduced from Work in Progress. The disallowance was also added to the Book Profit u/s 115JB, which the appellant challenged. The appellate tribunal noted that the sole issue was the quantum of disallowance u/s 14A and its adjustment for Book Profits u/s 115JB. The AO invoked Section 14A due to exempt dividend income earned by the appellant. The disallowance amount was computed under Rule 8D. The tribunal set aside the first appellate authority's decision and remanded the matter to the AO for reconsideration.

*For AY 2014-15:*
Similar grounds were raised for this AY, with the disallowance under Section 14A r.w.r. 8D being contested. The appellant argued that no new investments were made during the year, and the disallowance should be reduced from Work in Progress. The tribunal observed that the AO had computed the disallowance based on Rule 8D. The tribunal emphasized the need for the AO to form a proper opinion before applying Rule 8D. Referring to a recent Supreme Court judgment, the tribunal highlighted the importance of disallowing expenses related to investments, regardless of the motive. The tribunal set aside the first appellate authority's decision for both AYs and remanded the matter to the AO for reconsideration, considering all relevant legal provisions and precedents.

In both cases, the tribunal allowed the appeals for statistical purposes, providing the appellant with an opportunity to present their case before the AO. The decisions were pronounced on 06th June, 2019.

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