2011 (1) TMI 1572 - AT - Income Tax

Summary

Issues involved:
1. Disallowance under section 14A for non-taxable income from profit on sale/redemption of investments.
2. Computation of disallowance under section 14A against profit from sale/redemption of investments.
3. Levy of interest under sections 234B and 234C in respect of difference in returned income due to an order issued by Insurance Regulatory and Development Authority of India (IRDA).

Issue 1 - Disallowance under section 14A:
The appeal was filed against the CIT(A)'s order concluding that disallowance under section 14A is applicable to non-taxable income earned from investments. The Tribunal referred to a previous decision in the assessee's own case and directed the CIT(A) to verify certain figures of expenses for accurate computation. The Tribunal upheld the assessee's contention regarding the applicability of section 14A.

Issue 2 - Computation of disallowance under section 14A:
The dispute centered on the method of computing disallowance under section 14A compared to non-taxable income from investment profits. However, since the first issue was decided in favor of the assessee, this issue became academic and was not further discussed.

Issue 3 - Levy of interest under sections 234B and 234C:
The matter of interest under sections 234B and 234C arose due to a difference in returned income following an order by IRDA. The Tribunal decided to restore this issue to the Assessing Officer (AO) pending the outcome of a writ petition before the High Court. The Tribunal refrained from commenting on the merits of the case due to the ongoing legal proceedings.

Additional Ground:
An additional ground was raised challenging the levy of interest under section 234D of the Act. The Tribunal admitted this ground for adjudication, citing legal precedents that indicated section 234D had no retrospective applicability. Consequently, the interest under section 234D was deemed unjustified and directed to be deleted.

In conclusion, the Tribunal partly allowed the appeal, addressing the issues of disallowance under section 14A, levy of interest under sections 234B and 234C, and the challenge against interest under section 234D. The decision was pronounced on 31st January 2011.