2013 (6) TMI 533 - AT - Income Tax

Disallowance u/s 43B - Held that - Facts and circumstances of the case leading to disallowance u/s 43B by hypothetically holding a view that the claim of the assessee becomes double deduction has not been interpreted correctly by the AO for the impugned assessment year even when the matter has been adjudicated upon and deliberated by the Tribunal in assessee s own case for the immediately preceding assessment years beginning from 1996-97. As the valuation of stock is not part of the claim of excise duty remaining unpaid. Therefore, it was misapplication of facts and figures in the mind of the AO to have discovered double deduction for the purpose of disallowance u/s 43B. In favour of assessee. Disallowance u/s 14A - CIT(A) restricted it to 1% only - Held that - As relying on DCIT vs EIH Associated Hotels Ltd (2008 (1) TMI 426 - ITAT CALCUTTA-D) & Sagrika Goods & Services Pvt. Ltd. 2013 (6) TMI 534 - ITAT KOLKATA has restricted the disallowance u/s 14A at 1% of the exempt income for years prior to the A.Yr.2008-09. Therefore, respectfully following the same AO directed to recomput the disallowance of expenditure relating to the exempt income at 1% of the exempt income being Long Term capital gain and dividend income - In favour of assessee.

Summary

Issues:
1. Addition of Rs.16.53 crores under section 43B of the IT Act
2. Restriction of disallowance under section 14A to 1%

Analysis:
1. The appeal by the Revenue contested the deletion of the addition of Rs.16.53 crores under section 43B of the IT Act by the ld. CIT(A). The Tribunal noted that the issue had been previously addressed in the assessee's own case for A.Yr. 1996-97 onwards. The Tribunal found that the AO's interpretation of double deduction was incorrect as the accounting system followed by the assessee was consistent and could not be adjusted under section 145A or 145(3) of the Act. The Tribunal highlighted that the valuation of stock did not relate to the claim of excise duty remaining unpaid, leading to the dismissal of the Revenue's appeal.

2. Regarding the restriction of disallowance under section 14A to 1%, the ld. CIT(A) justified the decision by referencing relevant case law. The Tribunal concurred with the ld. CIT(A)'s reasoning, noting that Rule 8D was not applicable for the assessment year in question. Citing precedents, the Tribunal upheld the restriction of disallowance at 1% of the dividend income based on decisions of the Hon'ble Kolkata Tribunal. Consequently, the appeal filed by the Revenue was dismissed, affirming the ld. CIT(A)'s order on both issues.

In conclusion, the Tribunal upheld the decisions of the ld. CIT(A) regarding the deletion of the addition under section 43B and the restriction of disallowance under section 14A, based on the consistency of the assessee's accounting system and relevant case law precedents. The Tribunal's detailed analysis and reliance on previous judgments ensured a fair and legally sound resolution of the issues raised in the appeal.