2017 (11) TMI 642 - HC - Income Tax

Disallowance u/s. 14A - did the Tribunal commit an error in deleting the disallowance concluding that interest free funds, far in excess of the amounts invested for earning exempt income, were available with the assessee - Held that - We see no reason to take a different view from Tribunal. Revenue tried strenuously to contend that the Tribunal s findings are perverse. Our attention was drawn to the order of the Assessing Officer and that of the Commissioner (Appeals). Neither of these orders, however, dislodge the Tribunal s finding of fact that at the command of the assessee interest free funds in excess of investment in tax exempt income were available. That being the position no question of law arises.

Summary

Issues:
Disallowance under section 14A of the Income Tax Act, 1961 for tax-free income and interest expenditure.

Analysis:
The appeals in question arose from a common judgment of the Income Tax Appellate Tribunal, where the Revenue raised specific questions regarding the disallowance of &8377; 30,78,541/- for the assessment year 2008-09 under section 14A of the Income Tax Act. The primary issue was whether the Tribunal erred in deleting the disallowance initially made by the Assessing Officer and upheld by the CIT (Appeals). The Tribunal's decision was based on the fact that the assessee had earned tax-free income of &8377; 58.41 lacs but had interest-free funds exceeding the amounts invested for earning exempt income. This finding was consistent with the Bombay High Court's ruling in a similar case, leading the High Court to uphold the Tribunal's decision.

The Revenue contended that the Tribunal's findings were erroneous, but upon review of the Assessing Officer's and Commissioner (Appeals)'s orders, it was found that neither order contradicted the Tribunal's factual determination regarding the availability of interest-free funds surpassing the investment in tax-exempt income. As such, the High Court concluded that no question of law arose from the Tribunal's decision. Additionally, a consequential question concerning the impact on computing minimum alternative tax was mentioned in one of the appeals; however, since the main issue remained undisturbed, this question did not require consideration.

Ultimately, the High Court dismissed the tax appeals, affirming the Tribunal's decision regarding the disallowance under section 14A of the Income Tax Act.