2015 (6) TMI 1163 - AT - Income Tax

Disallowance u/s 14A r.w.r 8D - assessee has rightly 84% expenses - CIT(A) has considered 100% expenses - Held that - the calculation submitted by the assessee is reasonable and was required to be accepted by Ld. CIT(A). Therefore, considering the details of expenditure and calculation submitted by the assessee, we uphold the disallowance only to the extent of ₹ 14,25,020/- and rest of the disallowance upheld by Ld. CIT(A) is deleted and appeal filed by the assessee is partly allowed. - Decided partly in favor of assessee.

Summary

Issues involved:
1. Disallowance under section 14A of the Income Tax Act, 1961 for assessment year 2005-06.

Analysis:
1. The appeals were cross appeals against the order passed by Ld. CIT(A)-4, Mumbai for the assessment year 2005-06. The Assessee's appeal contested the disallowance of Rs. 16,23,432 under section 14A, while the Revenue's appeal challenged the relief granted to the Assessee by Ld. CIT(A). The delay in filing the appeal was condoned due to valid reasons presented by the Assessee.

2. The primary issue raised by both parties concerned the disallowance under section 14A of the Act. The matter was previously remanded by the Tribunal to the AO for reassessment following the decision in the case of Godrej & Boyce Mfg. Co. Ltd. The AO calculated the disallowance at Rs. 29,82,705 based on 0.5% of average investment. The Assessee disputed this calculation and presented a detailed breakdown of expenses for consideration.

3. Ld. CIT(A) reviewed the expenses and the Assessee's calculation, concluding that a disallowance of Rs. 16,23,432 was appropriate, differing from the initial calculation. The Assessee argued that 84% of expenses amounting to Rs. 5,20,114 should be allocated, while the Revenue contended that the AO's calculation based on Rule 8D was correct.

4. The Tribunal noted that Rule 8D was not applicable for the assessment year 2005-06 as per the decision in Godrej & Boyce Mfg. Co. Ltd. The disallowance calculated by the AO was deemed excessive, and the appeal by the Revenue was dismissed. The Tribunal upheld a disallowance of Rs. 14,25,020 based on the Assessee's calculation, partially allowing the Assessee's appeal.

5. In conclusion, the Tribunal dismissed the Revenue's appeal and partially allowed the Assessee's appeal concerning the disallowance under section 14A for the assessment year 2005-06. The disallowance was adjusted based on a detailed review of expenses and calculations presented by the Assessee.