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Issues involved: Disallowance of administrative expenses u/s 14A u/r 8D.
Summary: The Revenue appealed against the order of the Commissioner of Income Tax(Appeals) for the assessment year 2008-09, specifically challenging the direction to make disallowance u/s 14A as per a previous decision. The main issue was the disallowance of administrative expenses u/s 14A r/w r 8D. The Assessing Officer (A.O) disallowed a certain amount under u/s 14A by applying Rule 8D, based on the assessee's investments. The CIT(A) directed the A.O to compute the disallowance u/s 14A as per a specific decision, not by applying Rule 8D. The dispute arose as the A.O's disallowance exceeded the actual expenses debited by the assessee. The Tribunal noted that Rule 8D should only be applied when Section 14A is attracted, and there must be a direct nexus between the expenditure and the exempt income. The Tribunal held that the disallowance of indirect expenses under Rule 8D was not justified in this case, as there was no direct nexus between the expenditure and the exempt income. The Tribunal emphasized that the purpose of Section 14A is to disallow expenses related to earning income not forming part of the total income. It was clarified that the disallowance cannot exceed the actual claim of expenditure. Citing a similar case, the Tribunal concluded that the disallowance should be restricted to the extent of the expenditure actually claimed by the assessee. Therefore, the Tribunal dismissed the Revenue's appeal, stating that there were no merits in the case. Judges' Names: SHRI VIJAY PAL RAO, JM & SHRI D. KARUNAKARA RAO, AM
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