2013 (3) TMI 871 - AT - Income Tax

Summary

Issues involved: Appeal against disallowance of expenditure u/s. 14A r.w. Rule 8D for assessment year 2008-09.

Summary:

Issue 1: Disallowance of expenditure u/s. 14A r.w. Rule 8D
The appellant, engaged in manufacturing and trading of edible oil, had investments in mutual funds and shares. The Assessing Officer (A.O.) disallowed expenditure of Rs.3,68,933 u/s. 14A r.w. Rule 8D, citing administrative expenses related to the investment portfolio. The CIT(A) upheld the disallowance, applying Rule 8D for disallowing expenses relating to exempt income. The appellant contended that no exempted income was earned, and investments were made in previous assessment years. The Tribunal noted that no investigation from borrowed funds was made for investments during the year, and other income did not include dividend income. As Rule 8D is effective from A.Y. 08-09, the Tribunal allowed the appeal, emphasizing the need to fulfill Section 14A conditions before applying Rule 8D.

Key Points:
- A.O. disallowed expenditure u/s. 14A r.w. Rule 8D due to administrative expenses related to investments.
- CIT(A) upheld the disallowance, applying Rule 8D for expenses relating to exempt income.
- Appellant argued no exempted income was earned, investments were from previous years.
- Tribunal found no investigation from borrowed funds for investments during the year.
- Other income did not include dividend income, supporting the appellant's claim.
- Rule 8D effective from A.Y. 08-09, conditions of Section 14A must be met before its application.
- Tribunal allowed the appeal, emphasizing compliance with Section 14A conditions before Rule 8D application.

This summary provides a detailed overview of the judgment, highlighting the issues involved and the Tribunal's decision regarding the disallowance of expenditure under Section 14A r.w. Rule 8D for the assessment year 2008-09.