ITAT directs AO to delete disallowances under Rule 8D(2)(iii) & sec 14A, and obtain DVO valuation for land sale.

The ITAT ruled in favor of the assessee by directing the AO to delete the disallowance under Rule 8D(2)(iii) and disallowance with regard to interest u/s 14A. Additionally, the ITAT instructed the AO to obtain valuation from the DVO for a land sale transaction under section 50C, remitting the matter back for further assessment.

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Issues:
1. Disallowance u/s 14A of the Act
2. Disallowance under Rule 8D(2)(iii)
3. Disallowance invoking provisions of section 50C of the Act

Issue 1: Disallowance u/s 14A of the Act

The Assessing Officer (AO) made a disallowance u/s 14A of the Act amounting to Rs.75 lakh. The AO rejected the assessee's claim of insufficient own funds and disallowed the amount. The Ld. CIT(A) partially upheld the disallowance under Rule 8D(2)(iii) but confirmed the disallowance of interest u/s 14A. The assessee contended that the issue was favorably decided in earlier years by the ITAT. The ITAT referred to previous orders and held that the disallowance of interest u/s 14A should be deleted as the assessee's own funds exceeded exempt income. The ITAT also ruled that disallowance u/s 14A cannot be imported into the computation of book profit u/s 115JB, following a Special Bench decision.

Issue 2: Disallowance under Rule 8D(2)(iii)

The AO accepted the assessee's claim of Rs.24,26,897 under Rule 8D(2)(iii). The Ld. CIT(A) upheld part of the disallowance under this rule. The ITAT, after considering arguments from both sides, directed the AO to delete the disallowance with regard to interest u/s 14A, as the assessee's own funds were significantly higher than exempt income. The ITAT also ruled that disallowance u/s 14A cannot be included in the book profit computation u/s 115JB, following a Special Bench decision.

Issue 3: Disallowance invoking provisions of section 50C of the Act

The AO disallowed an amount under section 50C as the stamp duty authorities valued a land sale higher than the sale consideration declared by the assessee. The Ld. CIT(A) confirmed this disallowance. The assessee argued that the AO should have referred the matter to the DVO for valuation as per section 50C since the assessee objected to the stamp authorities' valuation. The ITAT agreed with the assessee, stating that if objections are raised against the stamp authorities' valuation, the matter must be referred to the DVO. Therefore, the ITAT remitted the matter back to the AO for valuation by the DVO, partially allowing the appeal for statistical purposes.

In summary, the ITAT ruled in favor of the assessee by directing the AO to delete the disallowance under Rule 8D(2)(iii) and disallowance with regard to interest u/s 14A. Additionally, the ITAT instructed the AO to obtain valuation from the DVO for a land sale transaction under section 50C, remitting the matter back for further assessment.

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