Brief of the Case: In the cited case, ITAT affirmed the earlier order of ITAT in a similar case of the same assessee that once provisions of section 14A of the IT Act are to be invoked, the disallowance is to be computed as per rule 8D of the IT rules.
Facts of the Case: The Assessee was a Public Limited Company and it earned dividend of Rs.1,74,04,733/- during the year. The Assessing Officer disallowed an amount of Rs.28,98,891/- being 0.5% of the average value of investments during the relevant previous year.
On aggrieved by the order of the AO, the assessee preferred an appeal before CIT(A), who re-examined the issue in the light of various judicial pronouncements and following his earlier order for assessment year 2009-10 in the assessee’s own case, CIT(A) deleted the addition made by AO.
Revenue appealed against the order of CIT(A) on a solitary ground that CIT(A) erred in law and on facts of the case in deleting the addition of Rs.28,98,891/- made u/s 14A of the Income Tax Act, 1961 on account of disallowance of expenditure incurred in earning dividend income without verifying the facts on records and assigning any logical reason.
Contention of the Revenue: Revenue invited attention to the order of the ITAT for assessment year 2009-10 in the assessee’s own case, in which it was held that once provisions of section 14A of the Act are to be invoked, disallowance is to be computed as per rule 8D of the rules. Since the CIT(A) adjudicated the issue in the instant A.Y 2010-11 following his view taken in A.Y 2009-10, which had been reversed by the Tribunal, the order of the Tribunal for A.Y 2009-10 be followed in the impugned assessment year (i.e. A.Y 2010-11) in view of rule of consistency.
Contention of the Assessee: Assessee contended that in the impugned assessment year (i.e. A.Y 2010-11), the assessee had not incurred any expenditure in earning the dividend income. Therefore, no disallowance can be made.
Held by CIT (A): The CIT (Appeals) deleted the addition made by AO by following his earlier order for assessment year 2009-10 in the assessee’s own case.
Held by ITAT: ITAT examined assessee’s own case for A.Y 2009-10, wherein ITAT had held that once provisions of section 14A of the Act are to be invoked, the disallowance is to be computed as per rule 8D of the rules. Following the view taken by the ITAT in assessment year 2009-10, it was decided the issue in favour of the Revenue. Accordingly, the order of CIT(A) was set aside and that of the Assessing Officer was restored.
