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2014 (8) TMI 157 - AT - Income TaxLevy of interest u/s.234D - Retrospective amendment to the provision Held that - The Revenue could upon retrospective amendment, move a rectification u/s.154 Relying upon Ester Industries Ltd. vs. Union of India 2013 (4) TMI 489 - DELHI HIGH COURT - the Revenue cannot proceed de hors and in disregard with the established law, the decision by a higher appellate authority being binding on the subordinate authority - the law itself has intervened to provide a clear and unambiguous answer to the legal issue decided by the tribunal, which the assessee seeks to be given effect to, besides having been clarified by the high court Decided against Assessee. Disallowance u/s 14A r.w. Rule 8D Held that - The entire disallowance is under rule 8D(2)(iii), i.e., at 0.5% of the average value of the investment, reckoned at one half of the book value of investments (yielding tax-exempt income), as at the beginning and the close of the year - there is not much difference between the opening and the closing value of the investment and the bulk of the tax exempt income arising by way of interest on tax-free bonds Revenue ought to have required the assessee to substantiate its claim of the working of suo motu disallowance u/s.14A with reference to its accounts, and which would include the underlying vouchers as well relying upon Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT 2010 (8) TMI 77 - BOMBAY HIGH COURT the matter is remitted back to the Ao for fresh adjudication Decided in favour of Assessee.
Issues Involved:
1. Levy of interest under Section 234D for A.Y. 2001-02. 2. Provision of interest calculation details under Section 234D for A.Y. 2002-03. 3. Disallowance under Section 14A for A.Y. 2009-10. Detailed Analysis: A.Y. 2001-02 (ITA No. 2726/Mum/2013) Issue: Confirmation of Levy of Interest under Section 234D The primary issue for this assessment year is the confirmation of the levy of interest under Section 234D by the Commissioner of Income Tax (Appeals) [CIT(A)]. The retrospective amendment to Section 234D by the Finance Act, 2012, which is effective from 01.06.2003, clarified that interest is chargeable for any assessment year if proceedings are completed after this date. This amendment was upheld by the jurisdictional High Court in the case of CIT vs. Indian Oil Corporation Ltd. [2012] 210 Taxman 466 (Bom). The assessee's grievance is based on a prior Tribunal decision in its favor, which directed the cancellation of interest under Section 234D. However, the CIT(A) upheld the levy based on the retrospective amendment and the High Court's affirmation. The Tribunal acknowledged that while the Assessing Officer (A.O.) should have followed the Tribunal's earlier order, the retrospective amendment rendered the levy of interest legally valid. The Tribunal concluded that the CIT(A) acted correctly in upholding the levy of interest, given the change in law. A.Y. 2002-03 (ITA No. 2727/Mum/2013) Issue: Provision of Interest Calculation Details under Section 234D For this year, the issue is the provision of details regarding the interest charged under Section 234D. The assessee requested the working details of the interest charged to verify its correctness. The Tribunal noted that the levy of interest under Section 234D is not disputed by the assessee, and the appeal is not maintainable in law as per the Supreme Court's decision in Central Provinces Manganese Ore Co. Ltd. vs. CIT [1986] 160 ITR 961 (SC). The Tribunal emphasized that the assessee is entitled to the relevant details, which should be provided by the Revenue upon request. The Tribunal advised the assessee to follow the permissible legal course to obtain these details, such as moving an application under Section 154 for rectification if there is any discrepancy in the interest calculation. A.Y. 2009-10 (ITA No. 2729/Mum/2013) Issue: Disallowance under Section 14A The issue for this year is the disallowance under Section 14A, which was confirmed by the CIT(A). The A.O. applied Rule 8D to calculate the disallowance, resulting in an additional disallowance of Rs. 47.16 lakhs over the assessee's suo motu disallowance of Rs. 10.20 lakhs. The CIT(A) upheld this disallowance due to substantial investment activity and the mandatory application of Rule 8D. The assessee argued that the A.O. should have expressed dissatisfaction with the assessee's accounts before applying Rule 8D. The Tribunal agreed that the A.O. must examine the assessee's accounts and express satisfaction or dissatisfaction as required by law. The Tribunal restored the matter to the A.O. to allow the assessee an opportunity to substantiate its claim and for the A.O. to decide the matter afresh following the procedure under Section 14A(2). Conclusion: - A.Y. 2001-02: The appeal is dismissed, and the levy of interest under Section 234D is upheld due to the retrospective amendment. - A.Y. 2002-03: The appeal is dismissed, but the assessee is entitled to obtain the interest calculation details through the appropriate legal process. - A.Y. 2009-10: The appeal is allowed for statistical purposes, and the matter is remanded to the A.O. for fresh determination following the proper procedure under Section 14A.
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