2015 (2) TMI 1302 - AT - Income Tax

Disallowance u/s 14A read with Rule 8D as against a dividend income - HELD THAT - The present assessment year being assessment year 2007-08, the provisions of Rule 8D shall not be applicable as held in the case of Godrej Boyce Mfg. Co. Ltd 2010 (8) TMI 77 - BOMBAY HIGH COURT . In the above said decision, also held that for the year under consideration, the disallowance has to be computed in a reasonable manner. Hence, we are of the view that this issue requires fresh consideration at the end of the AO. Accordingly, we set aside the order of ld.CIT(A) on this issue and restore the same to the file of the AO with a direction to compute the disallowance u/s 14A accordingly

Summary

Issues:
Failure to dispose of Ground No.2 in assessment year 2007-08.

Analysis:

1. The assessee filed a Misc. Application pointing out that Ground No.2 raised in the assessment year 2007-08 was not disposed of by the Bench in the order dated 29.10.2014. The Tribunal acknowledged the merit in the petition, noting that the said ground was not addressed in the appeal filed for the mentioned assessment year.

2. With the consent of both parties, Ground No.2 was taken up for hearing, which pertained to the disallowance made by the Assessing Officer (AO) under section 14A read with Rule 8D of the IT Act. The AO had disallowed &8377; 3,67,258 against a dividend income of &8377; 3,66,382 received by the assessee. However, the Tribunal observed that for the assessment year 2007-08, Rule 8D provisions were not applicable, citing a decision by the Jurisdictional High Court in the case of Godrej Boyce Mfg. Co. Ltd (328 ITR 81).

3. Referring to the aforementioned decision, the Tribunal held that for the relevant year, the disallowance should be computed in a reasonable manner. Consequently, the Tribunal set aside the order of the CIT(A) on this issue and directed the AO to reevaluate and compute the disallowance under section 14A of the Act reasonably, in line with the guidance from the Hon'ble Bombay High Court in the Godrej Boyce Mfg. Co. Ltd case.

4. As a result, the Misc. Application filed by the assessee was allowed, and Ground No.2 taken in appeal was treated as allowed for statistical purposes. The order was pronounced in the open court on 13th Feb, 2015.

This comprehensive analysis covers the issues raised in the judgment, detailing the grounds, arguments presented, legal provisions applied, and the final decision rendered by the Tribunal.