ITAT Partially Allows Appeals on Disallowances: Section 14A, Rule 8D, Section 36(1)(va)

The ITAT partially allowed the appeals concerning disallowances under Section 14A for AYs 2013-14 & 2014-15, deleting disallowances under Rule 8D(2)(ii) but upholding disallowances under Rule 8D(2)(iii). The appeal on the disallowance under Section 36(1)(va) for default in PF payment was dismissed based on a Gujarat High Court decision. Regarding the computation of business income from the sale of flats, the ITAT directed a reexamination for AY 2013-14 and set aside the issue for fresh determination by the AO for AY 2014-15.

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Issues:
1. Disallowance under Section 14A concerning AYs 2013-14 & 2014-15.
2. Disallowance under Section 36(1)(va) for default in PF payment.
3. Method of computation of business income from sale of flats.

Issue 1 - Disallowance under Section 14A:
The appeals were filed against the CIT(A)'s orders concerning disallowances under Section 14A of the Income Tax Act for AYs 2013-14 & 2014-15. The assessee challenged the disallowances, arguing that sufficient interest-free funds were available and that the onus was on the AO to prove expenditure for earning exempt income. The ITAT partially allowed the appeals, deleting disallowances under Rule 8D(2)(ii) but upholding disallowances under Rule 8D(2)(iii) for both AYs.

Issue 2 - Disallowance under Section 36(1)(va):
Regarding the disallowance under Section 36(1)(va) for default in PF payment, the ITAT dismissed the appeal based on the decision of the Gujarat High Court. The ITAT found no merit in the assessee's grievance in this regard.

Issue 3 - Computation of Business Income from Sale of Flats:
The ITAT considered the method of computing business income from the sale of flats. The assessee argued that the FMV on the date of conversion of land into stock-in-trade should be taxed as long-term capital gain, with excess consideration as business income. The ITAT allowed the appeal for AY 2013-14, directing the AO to reexamine the issue based on the submissions and evidences provided by the assessee. The ITAT also partially allowed the appeal for AY 2014-15, setting aside the issue for fresh determination by the AO.

In conclusion, the ITAT partially allowed both appeals, addressing the issues of disallowances under Section 14A, default in PF payment, and computation of business income from the sale of flats. The judgments were delivered on 09/07/2019 by the ITAT Ahmedabad.

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