2018 (4) TMI 1211 - HC - Income Tax

Disallowance u/s 14A - Held that - We are of the opinion that the Income Tax Appellate Tribunal should reconsider the issue after taking note of the decision of the Special Bench in case of Assistant Commissioner of Income-tax, Circle 17(1), New Delhi v. Vireet Investment (P.) Ltd. 2017 (6) TMI 1124 - ITAT DELHI . Accordingly, the question of law as framed is answered as above.

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal on disallowance under Section 14A of Income Tax Act read with Section 8D(2)(iii) - Interpretation of Rule 8(D) and Section 14A - Consideration of decision of Special Bench in a similar case.

Analysis:
The Appellant Assessee challenged the order of the Income Tax Appellate Tribunal, Panaji, regarding disallowance under Section 14A of the Income Tax Act read with Section 8D(2)(iii) for the assessment year 2010-11. The Appellant earned dividend income but disallowed it under Section 14A. The Assessing Officer computed disallowances under Section 8D(2)(ii) and (iii). The appeal to the Commissioner of Income Tax (Appeals) and further appeal to the Tribunal were dismissed. The Appellant contended that the Tribunal misinterpreted Rule 8(D) and Section 14A and cited a Special Bench judgment in a similar case. The Respondent argued that the Tribunal's view was correct.

The High Court noted that the Tribunal did not consider the Special Bench decision before delivering its judgment. The Court did not comment on the Tribunal's decision to proceed without considering the Special Bench judgment but emphasized the relevance of the Special Bench decision to the current case. The Respondent argued that the facts must be examined before applying the Special Bench decision. The Court held that the Tribunal should reconsider the issue in light of the Special Bench decision and directed the Tribunal to do so.

As a result, the High Court allowed the appeal, quashed the Tribunal's judgment, and restored the case to the Tribunal for a fresh decision considering the Special Bench judgment. The Court emphasized that the Tribunal should review the case on its own merits after considering the Special Bench decision. No costs were awarded in this matter.