2016 (7) TMI 1527 - AT - Income Tax

Disallowance u/s 14A - applicability of provisions of Rule 8D - HELD THAT - For the Assessment Year under consideration i.e. Assessment Year 2007-08, the provisions of Rule 8D have no application as held by the Jurisdictional High Court in the case of Godrej Boyce Mfg. Co 2010 (8) TMI 77 - BOMBAY HIGH COURT . It was held that Rule 8D applies only prospectively. Therefore, we hold that provisions of Rule 8D have no application for Assessment Year 2007-08. However, reasonable disallowance should be made and we direct the Assessing Officer to restrict the disallowance under section 14A at 2% of the dividend income as reasonable expenses for earning exempt income. This ground of the assessee is partly allowed Deduction of disallowance of employees separation cost which was claimed u/s. 37(1) - HELD THAT - Issue becomes academic in view of the order passed u/s. 143(3) r.w. Sec. 148 wherein the Ld. CIT(A) has given relief. Thus, this ground of the assessee is dismissed. Disallowance of depreciation claimed on actual cost of the assets as per Sec. 43(1) - Held that - As for the Assessment Year 2008-09 we find that the Co-ordinate Bench confirmed the order of the Ld. CIT(A) in holding that the Assessing Officer to take the cost of acquisition of assets acquired by it from Tata Motors Ltd., at the cost at which they have been acquired i.e. the actual consideration paid by the assessee.

Summary

Issues:
1. Disallowance under section 14A r.w. Rule 8D for A.Y. 2007-08.
2. Deduction of disallowance of employees separation cost under section 37(1) of the Act.
3. Disallowance of depreciation claimed on actual cost of assets under Sec. 43(1) of the I.T. Act.

Issue 1: Disallowance under section 14A r.w. Rule 8D for A.Y. 2007-08:
The first issue pertains to the disallowance under section 14A r.w. Rule 8D for the assessment year 2007-08. Initially, the Assessing Officer disallowed a specific amount invoking provisions of Sec. 14A r.w. Rule 8D. The assessee contended that no expenditure was incurred for earning dividend income, hence disallowance was unwarranted. The Ld. CIT(A) upheld the disallowance. However, the assessee argued that Rule 8D is not applicable retrospectively, citing a High Court judgment. Eventually, the Tribunal held that Rule 8D does not apply for A.Y. 2007-08 and directed a reasonable disallowance at 2% of the dividend income as expenses for earning exempt income, partially allowing the assessee's ground.

Issue 2: Deduction of disallowance of employees separation cost under section 37(1) of the Act:
The second issue concerns the deduction of disallowance of employees' separation cost claimed under section 37(1) of the Act. The Ld. Counsel for the assessee argued that this issue became academic due to a relief granted by the Ld. CIT(A) under a different section. Consequently, the ground raised by the assessee was dismissed.

Issue 3: Disallowance of depreciation claimed on actual cost of assets under Sec. 43(1) of the I.T. Act:
The final issue revolves around the disallowance of depreciation claimed on the actual cost of assets under Sec. 43(1) of the I.T. Act. The Tribunal noted that a similar issue had been decided for the subsequent assessment year. The Ld. Counsel for the assessee requested to follow the decision made for the later year. The Tribunal observed that the Co-ordinate Bench had upheld the Assessing Officer's decision regarding the cost of acquisition of assets. Consequently, the Tribunal confirmed the disallowance of depreciation claimed on the actual cost of the assets.

This comprehensive analysis of the judgment highlights the key issues raised, arguments presented, and the Tribunal's decisions on each matter, providing a detailed understanding of the legal aspects involved in the case.