2023 (10) TMI 1407 - HC - Income Tax

Appeal Dismissed: Court Upholds ITAT Decisions on Disallowances Under Income Tax Act Sections 14A, 36(1)(iii), and Rule 8D(2.

The Pr. Commissioner of Income Tax – 3 Versus Shapoorji Pallonji and Co. Ltd.

The Pr. Commissioner of Income Tax – 3 Versus Shapoorji Pallonji and Co. Ltd. - TMI Issues:1. Disallowance under section 14A of the Income Tax Act, 19612. Disallowance under section 36(1)(iii) of the Income Tax Act, 19613. Disallowance under rule 8D(2) and foreign exchange fluctuations under section 115JB of the Income Tax Act, 1961Issue 1: Disallowance under section 14A of the Income Tax Act, 1961The first question of law raised in the appeal was whether the ITAT was justified in restricting the disallowance made under section 14A to a specific amount without considering the calculation as per Rule 8D. The appellant argued that the ITAT did not appreciate the correct application of the disallowance rule. The crux of the issue was the proper interpretation and application of section 14A in conjunction with Rule 8D for determining the disallowance amount.Issue 2: Disallowance under section 36(1)(iii) of the Income Tax Act, 1961The second question of law involved the deletion of a disallowance under section 36(1)(iii) by the ITAT. The appellant contended that the ITAT erred in deleting the disallowance without acknowledging the AO's decision regarding the non-business purpose of the advance given. The key point of contention was whether the interest disallowed on the advance was correctly assessed under section 36(1)(iii) and if the ITAT's decision was justified based on the facts and circumstances of the case.Issue 3: Disallowance under rule 8D(2) and foreign exchange fluctuations under section 115JBThe final question of law focused on the ITAT's decision to restrict the disallowance under rule 8D(2) and foreign exchange fluctuations under section 115JB to a significantly lower amount than initially determined. The appellant argued that the ITAT disregarded relevant precedents and made an incorrect adjustment to the disallowance amount. The issue revolved around the proper application of rule 8D(2) and section 115JB in light of the specific circumstances of the case and the implications of ignoring previous decisions by the ITAT.In summary, the High Court dismissed the appeal for the Assessment Year 2011-12, citing a previous dismissal of a similar appeal for the Assessment Year 2010-11. The judgment did not delve into detailed reasoning but simply stated the dismissal of the appeal based on the circumstances and the previous decision.