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Issues involved: Appeals regarding disallowance u/s 14A of the Act and deletion of addition of compensation from customers.
Disallowance u/s 14A of the Act: The appeals involved cross appeals by the assessee and the Revenue regarding the disallowance u/s 14A of the Act for the AY 2007-2008. The Tribunal considered both appeals together due to identical issues. The Counsel for the assessee argued for remanding the Revenue's appeal to the AO based on a previous Tribunal order. The Tribunal agreed and remanded the issue to the AO for fresh consideration. The disallowance under section 14A should be made only after considering the books of accounts and issues of reasonableness, without indirectly applying Rule-8D of IT Rules. The Tribunal referred to judgments of the Bombay High Court to support this stance. The AO was directed to restrict the disallowance to 2% of the total exempt income in line with the High Court's decisions. Both parties' grounds were allowed for statistical purposes. Deletion of addition of compensation from customers: The Revenue's appeal also raised the issue of deletion of an addition of Rs. 30,00,000 made on account of compensation from customers. The Tribunal remanded this issue to the AO with identical directions as a similar issue was remanded for a subsequent assessment year. The Tribunal allowed the Revenue's appeal on this ground for statistical purposes. In conclusion, both the Revenue and the assessee's appeals were allowed for statistical purposes, with the Tribunal providing detailed reasoning and directions for the issues of disallowance u/s 14A of the Act and deletion of addition of compensation from customers.
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