2013 (10) TMI 700 - AT - Income Tax

Disallowance u/s 14A of the Income Tax Act - Method of computation of disallowance u/s 14A of the Act Counsel of the assessee contends that Assessing Officer has included the profit on sale of investments amounting to ₹ 67.25 crores as exempted income and accordingly, computed the disallowance u/s. 14A of the Act Held that - Assessee has paid tax on the above said amount and hence, the Assessing Officer was not correct in treating the same as exempted income - Restored the issue to the file of the Assessing Officer with a direction to examine the above said claim of the assessee and, if satisfied with the same, re-compute the disallowance u/s. 14A accordingly Decided in favor of Assessee. Interest u/s 244A of the Income Tax Act Claim of interest by assessee on the statutory interest Held that - Reliance has been placed upon the judgment in the case of Sandvik Asia Ltd. vs. CIT 2006 (1) TMI 55 - SUPREME Court - There was an inordinate delay on the part of the Revenue in refunding certain amount which included the statutory interest and therefore, directed the Revenue to pay compensation for the same not an interest on interest - Section 244A to the Act which provides for interest on refunds under various contingencies - It is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest Issue to be set aside to the file of the assessing officer.

Summary

Issues:
1. Disallowance made u/s 14A of the Act for assessment year 2006-07.
2. Method of computation of disallowance u/s 14A of the Act.
3. Disallowance of contribution made to Retired Employees Medical Benefit Scheme u/s. 40A(9) of the Act.
4. Computation of interest u/s. 244A of the Act.

Analysis:

1. Disallowance made u/s 14A of the Act for assessment year 2006-07:
The assessee challenged the disallowance made u/s 14A of the Act. The Ld. Counsel did not press the ground challenging the disallowance. The remaining ground was about the method of computation of disallowance u/s 14A. The Assessing Officer included "profit on sale of investments" as exempted income, which the assessee contested as incorrect. The Tribunal set aside the order of the Ld. CIT(A) and directed the Assessing Officer to re-examine the claim of the assessee and re-compute the disallowance u/s 14A accordingly.

2. Disallowance of contribution made to Retired Employees Medical Benefit Scheme u/s. 40A(9) of the Act:
The only issue in the appeal filed by the revenue was the deletion of disallowance of contribution made to the Retired Employees Medical Benefit Scheme. The Tribunal noted that a previous decision favored the assessee on this issue. The Ld. CIT(A) followed the decision of the Tribunal and deleted the disallowance, justifying it by citing the Tribunal's earlier ruling. The Tribunal upheld the decision of the Ld. CIT(A) based on the precedent set by the jurisdictional Tribunal.

3. Computation of interest u/s. 244A of the Act:
The appeals filed by the assessee raised the issue of computation of interest u/s. 244A of the Act. The Ld. Counsel relied on a Supreme Court judgment but a subsequent Supreme Court decision clarified the issue. The Tribunal found that the issue required fresh examination in light of the latest Supreme Court ruling. Consequently, the Tribunal set aside the order of the Ld. CIT(A) and directed the Assessing Officer to re-examine the issue in accordance with the recent Supreme Court decision.

Conclusion:
The appeal filed by the Revenue for the assessment year 2006-07 was dismissed, while the appeal filed by the assessee for the same year was partly allowed. The remaining three appeals filed by the assessee were treated as allowed. The Tribunal pronounced the judgment on 11-10-2013, providing directions for further action on the issues discussed in the judgment.