2014 (7) TMI 718 - AT - Income Tax

Disallowance us 14A r.w Rule 8D of the Act Indirect and administrative expenses Held that - The AO has not considered the assessee s case, recorded any dissatisfaction in terms of section 14A(2) the decision in Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT 2010 (8) TMI 77 - BOMBAY HIGH COURT - The initial onus in the matter though would only be on the assessee thus, the matter is to be remitted back to the file of the AO Decided in favour of Assessee. Partial disallowance of claim of expenses Insurance and depreciation on telephone and motor car towards personal use Held that - The expenses obtained for that year brought to notice - to vary the percentage of the expenditure considered disallowable by the tribunal cannot be disregarded thus, it is restricted to 5%, as by the tribunal for the immediately preceding year Decided partly in favour of Assessee.

Summary

Issues:
1. Disallowance of indirect administrative expenditure under section 14A
2. Disallowance of expenditure on personal use of assets

Analysis:

Issue 1: Disallowance of indirect administrative expenditure under section 14A
The appeal raised two grounds, with ground 1 challenging the disallowance of Rs. 2,13,738 under section 14A. The disallowance was related to indirect administrative expenditure, calculated at 0.5% of the average investment in shares as per Rule 8D. The assessee argued that no expenditure was incurred towards earning dividend income and long-term capital gains on shares, as these incomes were not part of the total income. The Assessing Officer did not express any dissatisfaction under section 14A(2). The Tribunal had previously directed the AO to provide definite findings in a similar case for the preceding year. The Tribunal referred to the case law of Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT [2010] 328 ITR 81 (Bom) and emphasized the initial onus on the assessee to present its case. Therefore, the Tribunal decided to send the matter back to the AO for further examination and compliance with section 14A(2) based on legal requirements and facts.

Issue 2: Disallowance of expenditure on personal use of assets
The second ground of appeal concerned the disallowance of the claim for expenditure on telephone, motor car, insurance, and depreciation related to personal use, amounting to Rs. 2,58,821. The Tribunal had previously restricted the disallowance to 5% of the total expenditure in a similar case for the preceding year. Since there were no changes in the facts and circumstances, the Tribunal maintained the disallowance at 5% as decided earlier. It was clarified that this decision was based on the specific facts of the case and did not set a precedent. Therefore, the Tribunal partially allowed the assessee's appeal and upheld the disallowance at 5% for statistical purposes.

In conclusion, the Tribunal's judgment addressed the issues of disallowance of indirect administrative expenditure under section 14A and the disallowance of expenditure on personal use of assets, providing detailed legal analysis and referencing relevant case law to support its decisions.