2018 (4) TMI 1977 - HC - Income Tax

Disallowance u/s 14A r.w.Rule 8D - HELD THAT - This issue is covered by the judgment of this Court in the case of Commissioner of Income Tax-VI vs. Taikisha Engineering India Ltd. 2014 (12) TMI 482 - DELHI HIGH COURT where the Court held that unless the AO rejects the explanation that induces the necessity to offer a specific amount as expenditure by some reasons the mere rejection per se is unacceptable. The ITAT followed that decision; therefore no question of law arises on this aspect. MAT Computation - Second question urged by the Revenue does require consideration which is as follows - Did the ITAT fall into error in overlooking the Explanation (f) to Section 115J of the Act in the circumstances of the case? Issue notice of the appeal to the assessee returnable on 27th July 2018.

Summary

Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act
2. Consideration of Explanation (f) to Section 115J of the Act

Analysis:

Issue 1: Disallowance under Section 14A of the Income Tax Act
The appeal under Section 260-A of the Income Tax Act raised the first question regarding the disallowance directed by the Assessing Officer to the extent of over Rs.12.5 Crores under Section 14A of the Act by applying Rule 8-D of the Income Tax Rules, 1962. The Court referred to the judgment in the case of 'Commissioner of Income Tax-VI vs. Taikisha Engineering India Ltd.', where it was held that unless the Assessing Officer rejects the explanation that necessitates offering a specific amount as expenditure, the mere rejection itself is unacceptable. The ITAT also followed this decision, leading to the conclusion that no question of law arises on this aspect. Therefore, the Court did not find any merit in challenging the disallowance under Section 14A.

Issue 2: Consideration of Explanation (f) to Section 115J of the Act
The second question raised by the Revenue for consideration was whether the ITAT erred in overlooking Explanation (f) to Section 115J of the Act in the circumstances of the case. This question was deemed worthy of consideration by the Court. Consequently, notice of the appeal was issued to the assessee, returnable on 27th July 2018. The Court acknowledged the significance of this issue and decided to delve deeper into the application of Explanation (f) to Section 115J of the Act, indicating a potential area of contention that required further examination.

In conclusion, the judgment addressed the issues of disallowance under Section 14A of the Income Tax Act and the consideration of Explanation (f) to Section 115J of the Act. While the first issue was resolved based on precedent and the ITAT's decision, the second issue warranted further scrutiny, leading to the issuance of notice for a detailed examination of the matter.