2012 (5) TMI 683 - AT - Income Tax

Disallowance u/s 14A - Held that - The Tribunal in assessee s own case from a regular assessment completed u/s 143(3) of the IT Act, 1961 had considered the identical issue and remanded the matter back to the file of the AO for fresh consideration. The Tribunal directed the AO to follow the ratio laid down in the judgment of the Hon ble Bombay High Court in the case of M/s Godrej and Boyce Mfg. Co.,Ltd. 2010 (8) TMI 77 - BOMBAY HIGH COURT

Summary

Issues:
- Disallowance of estimated expenditure on earning income exempt u/s 10(23G) for assessment years 2004-05 & 2005-06.

Analysis:
1. The appeals were filed by the department against the separate orders of the CIT(A) for assessment years 2004-05 & 2005-06, both dated 25-02-2010. The brief facts revealed that the assessee, a nationalized commercial bank, had filed returns for both years, with subsequent assessments leading to disallowances on estimated expenditure for earning exempt income under section 10(23G) of the IT Act, 1961.

2. The CIT(A) allowed the appeal of the assessee, citing precedents and holding that the disallowance was improper. The revenue challenged this decision, contending that proportionate expenditure for earning exempt income should be disallowed, as per the IT Act, despite the bank's claim of not incurring such expenses due to its nature as a banking company.

3. The Tribunal noted that a similar issue in the assessee's case had been remitted back to the AO previously, following the judgment of the Bombay High Court in the case of M/s Godrej and Boyce Mfg. Co. Ltd. The Tribunal directed the AO to reevaluate the matter based on the High Court's decision, emphasizing the need for a reasonable basis for determining such expenditure and granting the assessee an opportunity to present relevant material.

4. Considering the previous remittance of the identical issue and the absence of changes in the factual scenario for the assessment year 2004-05, the Tribunal decided to remit the issue back to the AO for fresh consideration in line with the Bombay High Court's judgment. Therefore, the appeals filed by the revenue were allowed for statistical purposes, and the matter was ordered to be reconsidered by the Assessing Officer.

This detailed analysis of the judgment highlights the key legal arguments, precedents, and directions provided by the Tribunal in resolving the issue of disallowance of estimated expenditure on earning income exempt under section 10(23G) for the mentioned assessment years.