2014 (4) TMI 1148 - AT - Income Tax

Disallowance u/s 14A - Held that - We uphold the disallowance made under clause 8D(iii) of the Act by sustaining the order of the Commissioner of Income Tax (Appeals).

Summary

Issues involved:
1. Disallowance under section 14A read with Rule 8D(iii) of the Act.
2. Disallowance of direct expenditure under clause 8D(i) and clause 8D(iii).
3. Application of the decision of the Tribunal in similar cases.
4. Disallowance of proportionate management expenses under Rule 8D(iii).

Analysis:
1. The appeals were filed against the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2009-10 regarding disallowance under section 14A read with Rule 8D(iii) of the Act. The Assessing Officer disallowed amounts under clause 8D(i) and 8D(iii) as direct expenditure and 0.5% of average investments for earning dividend income exempt from tax. The Commissioner of Income Tax (Appeals) deleted the disallowance under clause 8D(i) but sustained the disallowance under clause 8D(iii), leading to appeals by both the assessee and Revenue.

2. The Commissioner of Income Tax (Appeals) considered the submissions and the decision of the Tribunal in similar cases, ultimately deleting the disallowance under clause 8D(i) based on the decision of the co-ordinate Bench of the Tribunal. The disallowance under clause 8D(iii) was upheld by the Commissioner of Income Tax (Appeals) based on legislative intent and the decision of the jurisdictional Bench of the ITAT, Chennai in a relevant case.

3. The Tribunal found no infirmity in the order of the Commissioner of Income Tax (Appeals) regarding the deletion of disallowance under clause 8D(i) based on the decision in the case of Sriram Capital Ltd. The disallowance under clause 8D(iii) was upheld by the Tribunal following the decision of the coordinate Bench of the Tribunal in a related case, affirming the correctness of the disallowance made by the Commissioner of Income Tax (Appeals).

4. The Tribunal upheld the disallowance under clause 8D(iii) based on the decision of the coordinate Bench of the Tribunal, which considered and approved the disallowance of proportionate management expenses while computing dividend income. The Tribunal dismissed both the appeals of the assessee and Revenue, affirming the orders of the lower authorities regarding the disallowances made under section 14A read with Rule 8D(iii) of the Act.

This judgment highlights the meticulous consideration of relevant legal provisions, precedents, and factual analysis in determining the disallowances under section 14A read with Rule 8D(iii) of the Income Tax Act, ensuring consistency and adherence to established legal principles.