2014 (3) TMI 928 - AT - Income Tax

Deleting of dis-allowance u/s.14A of the Act r.w. Rule 8D Held that - The decision in Godrej & Boyce Mfg. Co. Ltd v. DCIT 2010 (8) TMI 77 - BOMBAY HIGH COURT followed - Rule 8D is applicable from assessment year 2008-09 it cannot now turn around and say that no expenditure whatsoever was incurred for earning the exempt income thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of Revenue. Deletion of dis-allowance u/s 40a(i) of the Act - Overseas payments of professional and consultancy charges TDS not deducted - The decision in CIT Vs. M/s. Vector Shipping Services (P) Ltd. 2013 (7) TMI 622 - ALLAHABAD HIGH COURT followed - the provisions of section 40a(i) do not apply to those amounts which have already been paid by the assessee before the close of the relevant previous year thus, the dis-allowance u/s.40a(i) applies only to the amounts payable and not to those amounts which are already paid Decided against Revenue.

Summary

Issues:
1. Disallowance under section 14A read with rule 8D.
2. Disallowance under section 40a(i) for overseas payments without tax deduction at source.

Issue 1: Disallowance under section 14A read with rule 8D:
The appeal by the Revenue challenged the CIT(Appeals) order concerning two main issues, one of which was the deletion of disallowance under section 14A read with rule 8D. The Revenue contended that the Assessing Officer correctly applied Rule 8D for the Assessment Year (AY) 2008-09 and the CIT(Appeals) erred in restricting the disallowance. The Tribunal noted a previous decision where the issue was remanded back to the Assessing Officer for fresh adjudication. Following this precedent, the Tribunal remitted the issue back to the Assessing Officer for reconsideration in accordance with the law.

Issue 2: Disallowance under section 40a(i) for overseas payments without tax deduction at source:
The second issue revolved around the disallowance under section 40a(i) for overseas payments of professional and consultancy charges made without tax deduction at source. The assessee argued that since the payments were already made, the case was supported by a judgment of the Honorable Allahabad High Court. The Tribunal referred to various High Court decisions and held that the disallowance under section 40a(i) applies only to amounts 'payable' and not to amounts already 'paid'. Relying on judicial precedence, the Tribunal dismissed the ground of appeal by the Revenue, partially allowing the appeal for statistical purposes.

In conclusion, the Tribunal's judgment addressed the issues of disallowance under section 14A read with rule 8D and disallowance under section 40a(i) for overseas payments without tax deduction at source. The Tribunal remitted the first issue back to the Assessing Officer for fresh adjudication and dismissed the second issue based on judicial precedence favoring the assessee.