2012 (10) TMI 1209 - AT - Income Tax

Summary

Issues Involved: Three appeals before ITAT Mumbai regarding the applicability of Section 14A of the Income Tax Act for the assessment year 2007-2008.

ITA No.6392/M/2011 (Assessee's Appeal): The CIT (A) directed the AO to calculate direct expenses attributable to earning dividend income u/s 14A of the Act. Assessee contended no expenditure was incurred for earning exempt income.

ITA No.6112/M/2011 (Revenue's Appeal): Revenue challenged CIT (A)'s interpretation of Section 14A and Rule 8D, arguing for disallowance irrespective of income earned. CIT (A) set aside the order for fresh examination based on jurisdictional High Court's judgment.

CO No.142/M/2012 (Assessee's Cross Objection): Assessee sought direction for considering book value of investments instead of market value for computing disallowance under Rule 8D(2).

Summary of Judgment: The appeals revolved around the applicability of Rule 8D and Section 14A. The AO applied Rule 8D to disallow a sum, leading to appeals. CIT (A) set aside the issue for fresh assessment, considering jurisdictional High Court's judgment. ITAT allowed all appeals, directing AO to address objections and pass a speaking order for de novo assessment. The parties' contentions were considered, emphasizing proper appreciation of Section 14A provisions for the relevant assessment year.