2014 (6) TMI 409 - HC - Income Tax

Disallowance made u/s 14A of the Act Held that - The Tribunal has restored the proceedings back to the AO for working out the amount of disallowance The AO made a disallowance of Rs.37, 60, 774.00 inclusive of a disallowance of Rs.87, 285.00 out of interest expenditure and the balance of Rs.36, 73, 516.00 on account of administrative expenses - the disallowance on account of interest expenditure was not sustainable but restored the disallowance in respect of the balance to the AO - since the matter has been restored to the AO thus no substantial question of law arises for consideration Decided against Assessee. Disallowance of petty sums of commission Held that - The Tribunal has furnished cogent reasons - The assessee had paid commission to nine individuals - no details regarding the services rendered were filed by the assessee nor was any confirmation in respect of the commission filed - The AO made the disallowance holding that in the absence of details regarding these items of petty commission paid by the assessee it was unverifiable and was liable to be disallowed - Tribunal was of the view that the CIT (A) has totally failed to dislodge the main objection of the AO that no details were provided by the assessee and no confirmation had been obtained from the nine persons thus no substantial question of law arises for consideration Decided against Assessee.

Summary

Issues:
1. Interpretation of provisions of section 254 of the Income Tax Act regarding disallowance of expenses.
2. Disallowance of petty commission sums without proper documentation.

Analysis:

Issue 1: Interpretation of provisions of section 254
The appeal under Section 260A of the Income Tax Act, 1961 pertains to the assessment year 2006-07. The main contention raised in the appeal was whether the Tribunal was legally correct in entertaining the issue of disallowance of a sum of Rs.36,73,516 under section 14A and setting it aside for re-computation. The Tribunal had restored the proceedings back to the Assessing Officer to determine the amount of disallowance. The disallowance included interest expenditure and administrative expenses. While the disallowance on interest expenditure was found unsustainable, the disallowance on administrative expenses was upheld by the Tribunal. The Tribunal emphasized that the burden lies on the assessee to provide details of transactions related to dividend income and other activities to enable the Assessing Officer to calculate the disallowance accurately. As the matter was referred back to the Assessing Officer for quantification of disallowance, no substantial question of law was found to arise in this regard.

Issue 2: Disallowance of petty commission sums
The second ground of appeal involved the disallowance of Rs.1,93,389 paid as commission to nine individuals. The Assessing Officer had disallowed this amount due to the lack of details and confirmations regarding the services rendered by the individuals. However, the Commissioner of Income Tax (Appeals) reversed this decision. The Tribunal, on the other hand, noted that the CIT (A) failed to address the main objection raised by the Assessing Officer regarding the absence of details and confirmations. The Tribunal found the decision of the CIT (A) unjustified and based on facts. Consequently, it was held that no substantial question of law arose in this matter.

In conclusion, the High Court dismissed the appeal as it did not raise any substantial questions of law. Therefore, the decision of the Tribunal regarding the disallowance of expenses and commission sums was upheld, and no costs were awarded in the case.