Tax Appeals Partially Allowed: Disallowances Reduced for AY 2010-11 & 2013-14

The Tribunal partially allowed the appeals related to disallowances under Sections 14A and 40(a)(ia) for AY 2010-11 and AY 2013-14, respectively. The disallowance under Section 14A for AY 2010-11 was reduced to Rs. 21.64 Lacs, and the disallowance under Section 40(a)(ia) was not added back while computing Book Profits. Additionally, the disallowance under Section 14A for AY 2013-14 was reduced to Rs. 13.65 Lacs, and the disallowance under Section 41(1) was deleted as the liability was found to be subsisting. The Tribunal's judgments were pronounced on 19th February 2020.

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Issues:
1. Disallowance u/s. 14A for AY 2010-11
2. Disallowance u/s. 40(a)(ia) for AY 2010-11
3. Disallowance u/s. 14A for AY 2013-14
4. Disallowance u/s. 41(1) for AY 2013-14

Disallowance u/s. 14A for AY 2010-11:
The assessee challenged the disallowance under Section 14A of the Income Tax Act, 1961, amounting to Rs. 34,59,553. The Tribunal directed the Assessing Officer to restrict the disallowance to investments yielding exempt income during the year, reducing it to Rs. 21.64 Lacs. The Tribunal also held that bank charges should not be separately disallowed for earning exempt income. The disallowance was partially allowed.

Disallowance u/s. 40(a)(ia) for AY 2010-11:
The disallowance under Section 40(a)(ia) of Rs. 6,06,650 for nonpayment of TDS on professional fees was contested. The Tribunal ruled that this disallowance should not be added back while computing Book Profits u/s 115JB since it was a statutory disallowance. The appeal was partly allowed.

Disallowance u/s. 14A for AY 2013-14:
The assessee disputed the disallowance under Section 14A for AY 2013-14, computed at Rs. 25.18 Lacs. The Tribunal directed the Assessing Officer to consider only investments yielding exempt income during the year, reducing the disallowance to Rs. 13.65 Lacs. The disallowance was partially allowed.

Disallowance u/s. 41(1) for AY 2013-14:
The issue involved treating an outstanding amount of Rs. 73.23 Lacs as income under Section 41(1). The Tribunal found that the liability was subsisting based on a debt-confirmation letter, and hence, the provisions of Sec. 41(1) were not applicable. The addition was deleted, and this ground of appeal was allowed.

Conclusion:
Both appeals were partly allowed by the Tribunal after detailed analysis and consideration of the facts and legal provisions. The judgments were pronounced on 19th February 2020.

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