Tribunal rules on Revenue and assessee appeals, upholds CIT(A)'s decisions on disallowances.

The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal, confirming the CIT(A)'s decisions on disallowances under Section 14A, CSR expenditure, and Section 35AC. The Tribunal directed verification for Tax Deducted at Source (TDS) credit, emphasizing reliance on TDS certificates over Form 26AS.

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Issues Involved:
1. Disallowance under Section 14A read with Rule 8D of the Income Tax Act.
2. Disallowance of Corporate Social Responsibility (CSR) expenditure.
3. Disallowance under Section 35AC of the Income Tax Act.
4. Credit for Tax Deducted at Source (TDS).

Issue-wise Detailed Analysis:

1. Disallowance under Section 14A read with Rule 8D:
The Revenue challenged the restriction of disallowance under Section 14A to Rs. 13,20,000 by the CIT(A), arguing that the assessee had not utilized borrowed funds for making investments in securities. The assessee had earned exempt income of Rs. 59,40,911 and suo moto disallowed Rs. 2 lakhs under Section 14A. The AO worked out the disallowance at Rs. 1747 lakhs but CIT(A) restricted it to Rs. 13.20 lakhs, stating that the assessee had sufficient interest-free funds. The Tribunal upheld the CIT(A)'s decision, agreeing that no interest expenditure was incurred due to sufficient interest-free funds but confirmed the disallowance of Rs. 13.20 lakhs for administrative expenses as per Rule 8D(2)(iii).

2. Disallowance of Corporate Social Responsibility (CSR) expenditure:
The assessee claimed a deduction of Rs. 9,99,158 towards CSR activities, which was disallowed by the AO and upheld by CIT(A). The Tribunal agreed with the lower authorities, stating that the donations did not qualify for deduction under Section 80G as the recipient trusts were not recognized under Section 80G(5). Moreover, the expenditure did not meet the criteria for business expenditure under Section 37(1) as there was no evidence to show it was incurred wholly and exclusively for business purposes.

3. Disallowance under Section 35AC:
The assessee claimed a deduction of Rs. 6 lakhs donated to the Himalaya School Society under Section 35AC, which was disallowed due to the absence of a requisite certificate. The Tribunal upheld this disallowance but directed the AO to allow the deduction under Section 80G, as the society had the necessary 80G(5) certificate.

4. Credit for Tax Deducted at Source (TDS):
The assessee claimed TDS credit of Rs. 3,65,51,193, but the AO allowed only Rs. 1,76,64,053. The CIT(A) directed the AO to verify the TDS claim as per Form 26AS. The Tribunal upheld this direction, emphasizing that the AO should verify and allow the TDS credit based on the TDS certificates available with the assessee, even if not reflected in Form 26AS.

Conclusion:
The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal, confirming the CIT(A)'s decisions on disallowances and directing verification for TDS credit. The order was pronounced on 27/05/2021.

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