2015 (6) TMI 1180 - HC - Income Tax

Additions u/s 40A(9) - Tribunal had restored the issue to the file of A.O. in earlier years, therefore, by respectfully following the same we also restore the matter back to the file of A.O. to decide the same afresh - HELD THAT - Since the Tribunal did not delete any addition, the question does not appear to have been formulated on the basis of the impugned judgment and therefore, need not be decided. Disallowance under the head proportionate management expenses u/s 14A - AO decided initially by the assessing officer on the basis of a thumb rule - HELD THAT - Thumb rule applied by the assessing officer was rectified by another thumb rule by the Tribunal. If there is no basis to support the thumb rule applied by the AO or if there is any basis to support the thumb rule applied by the AO then the same rule shall apply to the thumb rule applied by the Tribunal. Mr. Chowdhury, learned advocate appearing on behalf of the appellant/revenue, was unable to show as to how the sum of ₹ 40 lack and odd disallowed by the assessing officer is in accordance with law. When the sum of ₹ 40 lacs and odd was on the basis of a pure guesswork and the learned Tribunal has reduced to a sum of ₹ 20 lacs, it cannot be said that the discretion was exercised unreasonably or illogically. Therefore, the second question is answered in the negative.

Summary

Issues:
1. Whether the Income Tax Appellate Tribunal erred in law in deleting the additions made under Section 40A(9) of the Income Tax Act, 1961 by the Assessing Officer?
2. Whether the Income Tax Appellate Tribunal erred in law in restricting the disallowance to the extent of Rs. 20 lakhs under the head proportionate management expenses under Section 14A of the Income Tax Act, 1961?

Analysis:
1. The first issue revolves around the deletion of additions under Section 40A(9) of the Income Tax Act. The Tribunal had not deleted any addition but instead restored the matter to the file of the Assessing Officer for fresh consideration. This decision was based on previous Tribunal orders in similar cases. As the Tribunal did not delete any addition, the first question was not decided based on the impugned judgment and was not required to be addressed.

2. The second issue concerns the restriction of disallowance under Section 14A of the Income Tax Act to Rs. 20 lakhs by the Tribunal. The Assessing Officer had disallowed a higher amount based on a thumb rule, which the Tribunal reduced to Rs. 20 lakhs. The Tribunal justified this reduction by citing previous decisions and the lack of a proper basis for the Assessing Officer's calculation. The Tribunal's decision to reduce the disallowance was considered reasonable and logical, as the original amount was based on guesswork. The appellant's argument that the original disallowance was not in accordance with the law was dismissed, and the Tribunal's decision was upheld. Therefore, the second question was answered in the negative, affirming the Tribunal's decision to restrict the disallowance to Rs. 20 lakhs.

In conclusion, the appeal was disposed of based on the above analysis of the two issues raised in the judgment.