2012 (3) TMI 438 - AT - Income Tax

Summary

Issues involved: Addition of liability payable to Elephanta Oil Vanaspati Industries Ltd. and disallowance under rule 8D(iii) of the IT Rules, 1962.

For the first issue, the Assessing Officer noted that the sundry creditors, including Elephanta Oil and Vanaspati Ltd., remained unmoved for many years. The liability of Rs. 1,53,48,850/- shown in the books of the assessee against Elephanta Oil & Vanaspati Ltd. was outstanding since 1984-85. Despite attempts to confirm this liability, the Assessing Officer was not satisfied with the evidence provided. The Ld. Commissioner of Income Tax (Appeals) upheld the addition of Rs. 1,53,48,850/- as the assessee failed to establish the genuineness of the liability. However, the ITAT Delhi set aside the lower authorities' orders, considering the net effect of the liability owed by Elephanta to the assessee, amounting to Rs. 3,61,840.78, and ruled in favor of the assessee.

Regarding the second issue of disallowance under rule 8D(iii) of the IT Rules, 1962, the Assessing Officer disallowed Rs. 43,422/- under section 14A read with Rule 8D due to long-term investments made by the assessee. The Ld. Commissioner of Income Tax (Appeals) confirmed the disallowance, citing relevant judgments and rules. However, the ITAT Delhi remitted the issue back to the Assessing Officer for fresh consideration in light of the decision of the Hon'ble Jurisdictional High Court, emphasizing the need for the assessee to be granted adequate opportunity to be heard.

In conclusion, the ITAT Delhi partly allowed the appeal for statistical purposes, setting aside the addition of the liability owed to Elephanta Oil Vanaspati Industries Ltd. and remitting the disallowance issue back to the Assessing Officer for reconsideration.