2018 (10) TMI 1911 - AT - Income Tax

Disallowance u/s.14A read with Rule 8D - AO worked out the disallowance being 0.5% of average value of investment under Rule 8D(2)(iii) - HELD THAT - There is need for scrutinizing the facts of the present case qua the binding of the judgment in the case of Reliance Capital Asset Management Ltd. 2017 (10) TMI 177 - BOMBAY HIGH COURT for the purpose of exclusion of the present case from the applicability of the formula laid down in Rule 8D(2)(iii) of the I.T. Rules, 1962. Therefore, agreeing with the Ld. DR, the issue stands remanded to the file of AO for fresh adjudication and for want of a speaking order. Accordingly, grounds raised by the assessee are allowed for statistical purposes.

Summary

Issues:
- Disallowance u/s.14A r.w.r. 8D of the I.T. Rules, 1962.

Analysis:
1. The Assessee filed four appeals against separate orders of CIT(A)-6,9 Pune, for Assessment Years 2008-09 to 2011-12, all involving disallowance u/s.14A r.w.r. 8D of the I.T. Rules, 1962.
2. The Assessee challenged the disallowance upheld by CIT(A) for A.Y. 2008-09, arguing that the disallowance should not exceed &8377; 3004/-, emphasizing no case for higher disallowance and that no additional expenditure beyond the already disallowed amount should be considered.
3. The AO made disallowances for all years under section 14A read with Rule 8D(2)(iii) of the Rules, rejecting the Assessee's claim of &8377; 3,004/- expenditure for A.Y. 2008-09 and making additional disallowances.
4. CIT(A) confirmed the disallowances, leading to the Assessee's appeal, questioning the excessive disallowance.
5. The Assessee raised additional grounds challenging the lack of AO's satisfaction before invoking section 14A, but the Tribunal found the AO had rightly assumed jurisdiction under Rule 8D(2)(iii) of the I.T. Rules, 1962.
6. On merits, the Assessee argued that mechanical quantification of disallowance is not universally sustainable, citing a jurisdictional High Court judgment and advocating for ad-hoc disallowance based on the number of transactions.
7. The Tribunal found the judgment applicable to the Assessee's case and remanded the issue to the AO for fresh adjudication, emphasizing the need for a speaking order and principles of natural justice.
8. The Tribunal's decision for A.Y. 2008-09 was deemed applicable to subsequent years (A.Yrs. 2009-10 to 2011-12), allowing all appeals of the Assessee for statistical purposes.