2018 (3) TMI 591 - HC - Income Tax

Addition u/s 14A - ITAT deleted the dis-allowance holding that the assessee has own interest free funds available more than the investment made in tax free securities - Held that - The issues raised herein stands concluded against the Revenue and in favour of the respondent, assessee by the decision of this Court in Commissioner of Income Tax V/s. HDFC Bank Ltd. 2014 (8) TMI 119 - BOMBAY HIGH COURT . Addition of dis-allowance u/s. 14A made to Book Profit - Held that - Tribunal has held that for the purpose of computing book profits, AO would include the amount of dis-allowance. However, as the issue of amount of dis-allowance u/s 14A has been restored to the Assessing Officer, this issue is also consequential to the quantum determined by the AO while considering the dis-allowance.

Summary

Issues:
1. Disallowance of investment made in tax-free securities under Section 14A of the Income Tax Act, 1961.
2. Restoration of the issue of disallowance to the Assessing Officer for re-adjudication.
3. Disallowance under Section 14A made to Book Profit.

Analysis:

Issue 1: Disallowance of investment made in tax-free securities under Section 14A:
The High Court considered the appeal challenging the Tribunal's order regarding the disallowance of a specific amount under Section 14A of the Income Tax Act for Assessment Year 2008-09. The Revenue questioned the Tribunal's decision to delete the disallowance, arguing that the assessee had interest-free funds exceeding the investment in tax-free securities. The Court noted that the Tribunal's reliance on a previous decision regarding interest expenditure was not directly applicable to disallowance under Section 14A. The Court dismissed the Revenue's appeal, citing a previous judgment that concluded the issue against the Revenue.

Issue 2: Restoration of the issue of disallowance to the Assessing Officer for re-adjudication:
The Tribunal had remanded the issue of disallowance under Section 14A back to the Assessing Officer for re-adjudication without specific directions. The Court found that this remand did not give rise to any substantial question of law and therefore could not be entertained. The issue was deemed to be procedural, requiring the Assessing Officer to re-examine the matter in accordance with the law and principles of natural justice.

Issue 3: Disallowance under Section 14A made to Book Profit:
Regarding the disallowance under Section 14A made to Book Profit, the Tribunal had directed the Assessing Officer to include the amount of disallowance in the computation of book profits. However, since the issue of disallowance had been remanded back to the Assessing Officer for re-evaluation, the Court found that this issue was consequential to the quantum determined by the Assessing Officer. Consequently, the Court concluded that this issue did not present a substantial question of law and dismissed the appeal.

In conclusion, the High Court dismissed the appeal challenging the Tribunal's order, as the issues raised did not give rise to substantial questions of law. The Court upheld the Tribunal's decision regarding the disallowance under Section 14A and the remand of the issue to the Assessing Officer for re-adjudication.