2018 (3) TMI 1730 - AT - Income Tax

Rectification of order - non-consideration of decision of Jurisdictional High Court - mistake apparent on the record of CIT(A) - Disallowance u/s 14A r.w.r. 8D - computing average investment for the purpose of Rule 8D(2)(iii) only those investments will be taken into account which have yielded tax exempt income. - HELD THAT - Considering case of ACIT vs Saurashtra Kutch Stock Exchange Ltd 2008 (9) TMI 11 - SUPREME COURT we are of the view that there appears mistake apparent on the record of CIT(A) in calculating the disallowance u/s 14A r.w. Rule 8D(2)(iii) of the Act. It would not amount to review of the order of CIT(A). It is well settled law that non-consideration of decision of Jurisdictional High Court is mistake apparent from record. Ld. Counsel for the assessee therefore rightly contended that Ld.CIT(A) did not follow the judgement of the Jurisdictional High Court in the case of ACB India Ltd 2015 (4) TMI 224 - DELHI HIGH COURT and shall have to rectify the mistake in his order in calculating the disallowance u/s 14A r.w. Rule 8D(2)(iii) of the Act. In view of the above discussion and in the light of the above decisions the order of Ld.CIT(A) is set aside and matter in issue is restored to the file of Ld.CIT(A)-18 New Delhi with direction to re-decide the appeal of the assessee in the light of the decision of Jurisdictional High Court (Supra) - Decided in favour of assessee for statistical purposes.

Summary

Issues involved:
Appeal against orders of Ld.CIT(A)-18, New Delhi for AY 2009-10 & 2011-12, involving disallowance u/s 14A of the Income Tax Act, 1961 based on Rule 8D(2)(ii)(iii) calculation.

Analysis:
1. Dispute in AY 2009-10:
- The AO made a disallowance u/s 14A of the Act r.w. Rule 8D(2)(ii)(iii) of ?10,84,889/-. The assessee challenged it before Ld.CIT(A), who confirmed the addition with modifications.
- The assessee filed a rectification application u/s 154, arguing that only investments yielding tax-exempt income should be considered for disallowance under Rule 8D(2)(iii), citing a High Court decision.
- Ld.CIT(A) rejected the rectification application, stating it amounted to a review, which was not permissible. The assessee's appeal against this was dismissed.
- The assessee contended that Ld.CIT(A) erred in not considering the High Court decision retroactively. The Tribunal agreed, setting aside Ld.CIT(A)'s order and directing a re-decision in line with the High Court ruling.

2. Dispute in AY 2011-12:
- Similar to AY 2009-10, the issue was regarding disallowance u/s 14A based on Rule 8D(2)(ii)(iii). The Tribunal, following the decision in AY 2009-10, set aside Ld.CIT(A)'s order and remanded the matter for fresh consideration.

3. Conclusion:
- Both appeals were allowed for statistical purposes, emphasizing the need for Ld.CIT(A) to re-decide the matters in light of the High Court's judgment. The Tribunal highlighted the retrospective applicability of legal decisions and the duty of authorities to consider such precedents in tax matters.