2012 (2) TMI 533 - HC - Income Tax

Summary

Issues involved:
1. Whether insurance claim paid should be included for computing deduction u/s 80IB of the Income Tax Act, 1961.
2. Disallowance under Section 14A for exempt dividend income.

Issue 1: Insurance claim for deduction u/s 80IB:
The High Court referred to a previous decision in Commissioner of Income Tax Vs. Spotking India Ltd. where it was concluded that insurance claim paid should be included for computing deduction u/s 80IB. The Revenue argued that if the insurance claim was for raw material, the previous decision would not apply. However, the assessee clarified that the insurance claim was for loss of goods in transit, which were manufactured by the eligible undertaking. The CIT (Appeals) wrongly assumed the loss was related to stock-in-trade without proper reasoning. The tribunal confirmed that the insurance claim was not for raw material. The Revenue cited a different view from Punjab and Haryana High Court, but the High Court upheld the previous decision without referring the matter to a larger Bench.

Issue 2: Disallowance under Section 14A:
Regarding disallowance under Section 14A for exempt dividend income, the assessee had disallowed an amount of &8377; 1,73,038, which included indirect expenses. The Assessing Officer did not analyze the direct and indirect expenses or comment on the deduction made by the assessee. The Assessing Officer applied Rule 8D, but the High Court clarified that this rule, inserted in 2008, is not retrospective and does not apply to the assessment year 2007-08.

In conclusion, the High Court found no merit in the appeal and dismissed it.