ALCO COMPANY P.LTD,MUMBAI vs. ASST CIT CIR 2(1), MUMBAI

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ITA 2608/MUM/2014Status: DisposedITAT Mumbai27 August 2019AY 2006-073 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal directed the Assessing Officer to verify the disallowance calculated by the assessee based on the proportion of exempt income to total income, following a similar method approved for a previous assessment year. Interest computation was also directed to be done as per law.

What were the facts?

The assessee company had claimed a disallowance under Section 14A. The issue was remanded by the Tribunal in the first round as Rule 8D was not applicable. In the second round, the Assessing Officer made a further disallowance.

What were the issues?

The primary issue was the disallowance of expenses relatable to exempt income under Section 14A. The method of computation of such disallowance was also a key issue.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY, JM & SHRI MANOJ KUMAR AGGARWAL, AM

For Appellant: Ms. Tasneem Varawala – Ld.AR, Shri Manoj Kumar-Ld. DR
For Respondent: Shri Manoj Kumar-Ld. DR
Hearing: 27/08/2019Pronounced: 27/08/2019

O R D E R Manoj Kumar Aggarwal (Accountant Member): - 1.

1.

The sole subject matter of captioned appeal for AY 2006-07 is disallowance u/s 14A. The assessee is in second round of appeal before us, since the issue in first round was set aside to the file of Ld. AO by the Tribunal vide order dated 19/01/2011 since Rule 8D was held to be not applicable to the year under consideration. The assessee had suffered disallowance u/s 14A for Rs.33.93 Lacs in the first round of assessment including suo-moto disallowance of Rs.6.68 Lacs made by the assessee. However, Ld. CIT(A) directed for exclusion of suo- moto disallowance offered by the assessee and accordingly, reduced the disallowance to Rs.27.24 Lacs, against which the assessee was under appeal in the first round. The assessee has earned exempt income of Rs.13.37 Crores during the year.

2. In the set-aside proceedings, Ld. AO has worked out disallowance of Rs.32.49 Lacs computed @0.5% of average investments. Accordingly, after adjusting the disallowance of Rs.27.24 Lacs already made after giving effect to the order of learned first appellate authority in the first round, a further disallowance of Rs.5.25 Lacs has been made in an assessment framed u/s 143(3) read with Section 254 of the Act on 29/10/2012. The same, upon confirmation by Ld. CIT(A), is under challenge before us. Apparently, the assessee has become worst-off in the second round of appeal.

3. After considering rival submissions and material on record, it transpires that Tribunal in assessee’s own case for AY 2005-06, ITA No.2305,1799/Mum/2013 order dated 08/06/2015, has approved the disallowance worked out by the assessee by applying the proportion of exempt income vis-à-vis total income to expenses relating to entire business. Similar calculation for the year under consideration has been placed by the assessee on Page No.29 of the paper book wherein following the said method, the assessee has worked out disallowance of Rs.16.30 Lacs. Since this method has already been accepted the Tribunal for AY 2005-06, respectfully following the same, we direct Ld. AO to verify the same and compute the disallowance on similar lines as done for AY 2005- 06 as per the directions of the Tribunal. The assessee is directed to provide the requisite details, in this regard. The ground stands partly allowed.

4. In other grounds, the assessee has pleaded for correct computation of interest. For the same, it would suffice on our part to direct Ld. AO to compute the interest as per law. The grounds stand allowed for statistical purposes.

5. The appeal stands partly allowed. Order pronounced in the open court on 27th August, 2019.

Sd/- Sd/- (Saktijit Dey) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member मुंबई Mumbai; िदनांकDated : 27/08/2019 Sr.PS:-Jaisy Varghese आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकरआयु�(अपील) / The CIT(A) 3. आयकरआयु�/ CIT– concerned 4. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 5. गाड�फाईल / Guard File 6. आदेशानुसार/ BY ORDER,

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