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2014 (4) TMI 388 - AT - Income TaxDisallowance u/s 14A of the Act Non-consideration of the issue - Whether the disallowance of % should be on the average value of investment of Rs. 4,26,87,166/- as shown by the assessee or it should be on the amount of Rs. 18,89,57,476/- as made by the AO - Held that - There is absolutely no discussion made by the CIT(A) in this regard - She has simply sustained the disallowance of Rs. 9,44,787/- without uttering even a single word thus, the matter is required to be remitted back to the AO for fresh adjudication Decided in favour of Assessee.
Issues:
Dispute over disallowance u/s 14A of the Act for assessment year 2009-10. Analysis: The appeal by the Assessee challenged the order of the CIT(A)-IV, Hyderabad related to the assessment year 2009-10. The Assessee raised effective grounds concerning the disallowance u/s 14A of the Act. The AO computed the disallowance u/s 14A in accordance with Rule 8D due to the Assessee's dividend income and investments. The CIT(A) upheld part of the disallowance made by the AO, citing the Assessee's self-disallowance as a basis for sustaining a portion of the disallowance. The Assessee contended that no borrowed funds were used for investments, and the disallowance was made in error. The CIT(A) acknowledged the Assessee's own funds but upheld some disallowances. The dispute revolved around the disallowance computation method under Rule 8D. The Assessee argued that no disallowance should be made under 14A due to the absence of a nexus between borrowed funds and investments. The DR supported the application of Rule 8D based on the average value of investments. The Tribunal reviewed the orders and material on record. The CIT(A) accepted part of the disallowance made by the Assessee but disputed the ½% disallowance on the average value of investments. The Tribunal found the lack of discussion by the CIT(A) on this issue and remitted it back to the AO for reconsideration. The Tribunal found Ground Nos. 2 & 3 partially in favor of the Assessee, leading to Ground No. 4 becoming irrelevant and dismissed. The appeal was partly allowed for statistical purposes. The judgment was pronounced on 02/04/2014.
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