2012 (7) TMI 312 - HC - Income Tax

Re-computation of the disallowance u/s 14A - Held that - Since substantial amount of the total expense incurred by the assessee, for earning both taxable and non-taxable income, has been offered for disallowance by the assessee itself. Neither the CIT(Appeals) nor the Departmental representative who appeared before the Tribunal could point out any error or serious discrepancy in the basis adopted by the assessee for making the disallowance - Tribunal was not in error in not remitting the matter to the Assessing Officer for fresh consideration - in favour of assessee.

Summary

Issues:
1. Whether the Tribunal was justified in not remitting the matter back to the AO for re-computation of the disallowance under section 14A of the Act?

Analysis:
The appeal involved a dispute regarding the disallowance under Section 14A of the Income Tax Act, 1961. The assessee, a company engaged in loan business, made a disallowance of Rs.36,64,485/- related to tax-free income earned. The Assessing Officer applied Rule 8D and disallowed a higher sum of Rs.78,70,570/-. The CIT(Appeals) held that Rule 8D was applicable from the assessment year 2008-09 and deleted the additional disallowance. The Tribunal upheld the CIT(Appeals) decision, finding no error in the assessee's disallowance method. The Tribunal dismissed the revenue's appeal, stating that there was no need to interfere with the CIT(Appeals) decision.

The revenue contended that the Tribunal should have remitted the matter to the Assessing Officer for re-computation of the disallowance under Section 14A. However, the Court disagreed, stating that the Assessing Officer should have assessed the sufficiency of the assessee's disallowance, regardless of Rule 8D's applicability. The Court noted that the departmental representative failed to point out any errors in the assessee's computation. Therefore, the Court found no strong grounds to disturb the Tribunal's decision and upheld the dismissal of the appeal.

The revenue referred to a judgment directing a re-examination of the disallowance under Section 14A. However, the Court emphasized that each case must be evaluated based on its facts. Since no errors were identified in the assessee's disallowance basis, the Court concluded that no substantial question of law arose for decision. Consequently, the appeal was dismissed, with no costs awarded.