×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
09-01-2019, Punjab National Bank, Section 14A, 10(34), 41(1), Tribunal Delhi
Aggrieved by the orders of the learned Commissioner of Income Tax (Appeals)-XVII, New Delhi (for short “Ld. CIT(A)”) for the assessment years 2006-07 to 2010-11, both the assessee and the revenue preferred these appeals challenging the deletion and sustaining certain additions made by the Ld. AO in respect of these years while framing the assessment.
2. The Punjab National bank (hereinafter referred to as “assessee”) is a bank incorporated under the Banking Companies (Acquisition and Transfer) of Undertaking Act, 1970 and is regulated by the Reserve Bank of India. For all the Assessment Years between 2006-07 to 2010-11 the assessee bank filed their returns of income and while framing the assessment, Ld. Assessing Officer made cer ain additions. In the 1st appeal preferred by the assessee in respect of all these years, Ld. CIT(A) deleted certain additions and sustained certain additions. Aggrieved by the findings where the additions were sustained by the Ld. CIT(A), assessee preferred ITA Nos.4253 & 2236/Del/2011, ITA Nos. 1788 & 4722/Del/2012, ITA Nos.2406/Del/2013 & 2469/Del/2014 and whereas challenging the deletion of the additions, revenue preferred ITA No.2469/Del/2011, ITA No. 4718/Del/2012, ITA No.2966/Del/2013. We shall proceed to deal with the issues
involved in each of these appeals hereunder. Asstt. Year 2007-08 (ITA 2236/2011 and ITA 2469/Del/2011)
3. In respect of this AY, assessee preferred ITA 2236/Del/2011 and revenue preferred ITA 2469/Del/2011. There are four grounds of appeal in 2236 /Del/2011 and nine grounds in ITA No. 2469 /Del/ 2011. Grounds number 1 and 4 in ITA 2236 /Del/ 2011 and Ground number 9 in ITA 2469 /Del/2011 are general in nature and do not require any adjudication. While other grounds are dealt with separately appeal wise, since Gr. No.2 in ITA 2236/2011 and Gr. No. 5 of ITA 2469/Del/2011relates to common issue regarding disallowance of expenditure under Section 14 A, they are dealt together.
Gr. No.2 in ITA 2236/2011 and Gr. No. 5 of ITA 2469/Del/2011 relating to disallowance of expenditure under Section 14 A of the Act.
4. During the financial year 2006-07, assessee earned exempt income amounting to Rs.58,39,06,899/- from dividend and tax-free income on account of other securities, but the assessee has not disallowed any expense under section 14 A of the Income Tax Act, 1961 (hereinafter, for short “the Act”). LearnedAssessing Officer observed that the assessee, having, infrastructure and common personnel for earning income under various heads and by using its administrative, managerial, and infrastructural setup for earning all the income which includes the exempt income, that the expenditure in relation to the exempt income is inbuilt and debited under various heads of profit and loss account, thereby calling for the application of Section 14 A of the Act read with rule 8D of the Income Tax Rules, 1962 (for short “the Rules”). On this premise learned Ld. AO disallowed the expenditure to the tune of Rs.58,74,00,000/-under section 14 A of the Act.
5. Ld. CIT(A) while noticing the order of the Hon’ble Bombay High Court in the case of Godrej Boyce &Manufacturing Company Limited held that Rule 8D is applicable from the Assessment Year 2008-09, but further held that where investment has been made in the assets, income from which is exempt from tax the assessing officer is duty bound to make the disallowance under Section 14A by adopting a rational basis and on that aspect this Tribunal in several judgments held that 10% of exempt income can be taken as reasonable disallowance. Following the same Ld. CIT(A) directed the disallowance to 10% of the exempt income. Revenue challenged the finding of the Ld. CIT(A) to restrict the disallowance under section 14 A of the Act whereas the assessee is aggrieved by the sustaining the disallowance at 10%.