KANTILAL NANJI KARANI,MUMBAI vs. ITO 14(1)(4), MUMBAI

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ITA 2880/MUM/2011Status: DisposedITAT Mumbai02 September 2016AY 2007-083 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that Rule 8D is applicable only from AY 2008-09 onwards. For earlier years, disallowance under Section 14A must be computed on a reasonable basis.

What were the facts?

The assessee's appeal concerns AY 2007-08, contesting an addition of ₹7,27,527 made under Section 14A. The Assessing Officer applied Rule 8D for disallowance, which was upheld by the CIT(A).

What were the issues?

The primary issue was the applicability of Rule 8D for disallowance under Section 14A for AY 2007-08 and the method for computing such disallowance on a reasonable basis.

Which sections of the Income-tax Act were involved?

Section 14A

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Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, “A” Bench, Mumbai

Before: Shri B.R. Baskaran (AM) & Shri Sanjay Garg (JM)

For Respondent: Shri A.B. Koli
Hearing: 25.8.2016Pronounced: 2.9.2016

O R D E R Per B.R. Baskaran (AM) :-

The appeal filed by the assessee is directed against the order dated 3.3.2011 passed by learned CIT(A)-25, Mumbai and it relates to A.Y. 2007-08.

2.

At the time of hearing one of the employees of a Chartered Accountant firm appeared and sought adjournment. However, we noticed that the assessee has not given any power of attorney in favour of it and hence we declined to accept the petition moved by the firm.

3.

We noticed that the assessee is contesting the addition of ` 7,27,527/- made u/s. 14A of the Act.

4.

We heard learned Departmental Representative and perused the record. We noticed from the assessment order that the Assessing Officer has followed methodology given u/r. 8D of the I.T. Rules for computing the disallowance u/s. 14A of the Act. Hon'ble Mumbai High Court in the case of Godrej & Boyce

2 Kantilal Nanji Karani Manufacturing Co. Ltd. 328 ITR 81 has expressed the view the provisions of Rule 8D will apply from A.Y. 2008-09 only. Hon'ble High Court has also held that disallowance u/s. 14A should be computed for the years earlier to A.Y. 2008-09 on a reasonable basis. Since the year involved in this appeal is A.Y. 2007-08, disallowance u/s. 14A has to be computed on a reasonable basis by considering the facts available on record. Since the Assessing Officer had computed disallowance as per Rule 8D and since the same has been confirmed by learned CIT(A), we are of the view that this issue requires fresh examination at the end of the Assessing Officer. Accordingly, we set aside the order passed by learned CIT(A) on this issue and restore the same to the file of the Assessing Officer with the direction to compute the disallowance u/s. 14A on reasonable basis by duly considering the facts, information and explanation that may be furnished by the assessee.

5.

In the result, appeal filed by the assessee is treated as allowed for statistical purposes.

Order has been pronounced in the Court on 2.9.2016

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