ITAT restored AO's order as it was not prejudicial to the Revenue's interest.
ITAT restored AO's order as it was not prejudicial to the Revenue's interest.
Assessee company was in the bakery products business. Assessee claimed disallowance u/s 14A (of Income Tax Act, 1961) of expenditure incurred in earning income which did not form part of assessee's total income. The disallowance in respect of treasury head time was worked out by AO at 40%. CIT(A) u/s 263 (of Income Tax Act, 1961) set aside AO's order and directed recomputation of disallowance. ITAT restored AO's order as it was neither erroneous nor prejudicial to the Revenue's interest.-501115
1. Assessee company was engaged in the business of manufacturing and trading of bakery products. For AY 2008-09 the Assessee filed return of income on 29.9.2008 declaring total income of Rs.99,74,64,581/-. In the course of assessment proceedings u/s.143(3) (of Income Tax Act, 1961), the AO noticed that the Assessee had on his own disallowed a sum of Rs.26,07,177/- u/s.14A (of Income Tax Act, 1961), being expenditure incurred by the Assessee in earning income which does not form part of the total income under the Act. The AO called upon the Assessee to explain the basis on which the aforesaid sum was quantified by the Assessee. The Assessee gave details of the basis of its quantification. AO was of the view that the time devoted by the Treasure head towards monitoring of investments and maintaining accounting records thereof was on the lower side. He estimated that 40% of the treasury head time was to be considered as having been utilized towards monitoring of investments and maintaining accounting records thereof. The disallowance in respect of treasury head was worked out by the AO at 40% of Rs.66,83,711 viz., Rs.26,73,484/-. As a consequence the disallowance u/s.14A (of Income Tax Act, 1961) was recomputed by the AO at Rs.36,09,734.
2. CIT(A) set aside the order of the AO and directed the AO to compute disallowance u/s.14A (of Income Tax Act, 1961) by applying Rule 8D (of Income Tax Rules, 1962).
3. On assessee's appeal, the ITAT held as under:
"In other words, it is only when no reasonable and proper parameters for making disallowance can be arrived at, that resort to Rule 8D(2) (of Income Tax Rules, 1962) can be had by the AO. Rule 8D(2) (of Income Tax Rules, 1962) will thus be a last resort when it becomes impossible to arrive at a just conclusion on the amount of expenses that has to be disallowed as attributable or incurred in earning exempt income. It cannot therefore be said that once the AO rejects the mode of computation of disallowance u/s.14A (of Income Tax Act, 1961) as made by the Assessee, he has no other option but to resort to Rule 8D (of Income Tax Rules, 1962).
4. Besides the above, we are also of the view that the AO has adopted one of the possible course open to him in law. The CIT cannot invoke jurisdiction u/s.263 (of Income Tax Act, 1961) of the just because he does not agree with the view of the AO. In other words u/s.263 (of Income Tax Act, 1961), the CIT cannot substitute his view with that of the AO. The decision relied upon by the learned counsel for the Assessee clearly supports the stand taken by the Assessee in this regard.
5. We therefore hold that the order of the AO was neither erroneous nor prejudicial to the interest of the revenue and therefore jurisdiction u/s.263 (of Income Tax Act, 1961) ought not to have been invoked by the CIT. We therefore quash the order u/s.263 (of Income Tax Act, 1961) and allow the appeal by the Assessee."
Case Reference - Britannia Industries Ltd. -versus- D.C.I.T., Circle-7,
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH "A", KOLKATA
[Before Hon'ble Shri N.V.Vasudevan, JM & Shri M.Balaganesh, AM]
ITA No390/Kol/2013
Assessment Year : 2008-09
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