2016 (6) TMI 336 - HC - Income Tax

Computation of deduction u/s 14A - whether the ITAT was justified in relying on the judgment of this Court in Maxopp Investment Ltd. v. CIT (2011 (11) TMI 267 - Delhi High Court) to hold that AO is required to record reasons why he was not accepting the expenditure as calculated by the Assessee for the purposes of Section 14A? - Held that - The Court does not propose to re-visit the decision of the co-ordinate Bench in Maxopp Investment Ltd. (supra). The ITAT cannot be faulted for following the said decision. Indeed, in the present case the AO has not recorded the reasons for concluding that the expenditure as claimed by the Assessee for the purposes of Section 14A of the Act is not acceptable. No substantial question of law arises for consideration.

Summary

Issues involved:
1. Condonation of delay in filing the appeal
2. Merits of the appeal regarding tax effect and interpretation of law

Condonation of delay in filing the appeal:
The Court noted a delay of 1100 days in filing the appeal, attributing it to the transition to e-filing and the practice directions issued by the Court. Despite providing ample time and resources for the bar to adapt to e-filing, the Court deemed the delay unacceptable. Consequently, the Court refused to condone the extraordinary delay of 1100 days, emphasizing the importance of timely compliance with procedural requirements.

Merits of the appeal regarding tax effect and interpretation of law:
In analyzing the appeal related to the tax effect arising from an ITAT order, the Court observed that the tax effect was less than the specified amount. However, due to the commonality of the impugned order with other assessment years, the appeal was considered on merits. The central issue raised was whether the AO was justified in not accepting the Assessee's expenditure calculation under Section 14A of the Income Tax Act without recording reasons, as per a previous judgment. The Court upheld the ITAT's decision to rely on the precedent, emphasizing the necessity for the AO to provide reasons for rejecting the Assessee's expenditure calculation. As the AO failed to do so in this case, the Court found no substantial question of law for consideration and dismissed the appeal both on the grounds of the significant delay in re-filing and on merits.