2011 (5) TMI 1117 - AT - Income Tax

Summary

Issues involved:
1. Disallowance u/s 14A of the Income Tax Act
2. Disallowance of unabsorbed engineering overheads

Issue 1: Disallowance u/s 14A of the Income Tax Act
The Assessing Officer disallowed a proportionate amount u/s 14A as the assessee had claimed dividend income as exempted income but did not disallow the management and administrative expenses. The Ld. Commissioner upheld the disallowance calculated by the Assessing Officer. However, the ITAT found that Rule 8D, used for the disallowance calculation, was not applicable for the assessment year in question based on a Mumbai High Court decision. The case was remitted back to the Assessing Officer for a fresh decision considering the reasonable disallowance.

Issue 2: Disallowance of unabsorbed engineering overheads
The Assessing Officer disallowed a portion of unabsorbed overhead on capital works expenditure, treating it as capital expenditure. The Ld. Commissioner upheld the disallowance, stating that proper details and documents supporting the claim were not provided by the assessee. The ITAT remitted the issue back to the Assessing Officer for a fresh decision, emphasizing the need for the assessee to provide necessary details and documents for consideration.

In conclusion, the appeal by the assessee was allowed for statistical purposes, with both issues being remitted back to the Assessing Officer for fresh consideration in light of the relevant legal principles and decisions.