CIT vs Sureshchand S. Jain

In this appeal by the Revenue for assessment year 2006-2007, following questions of law have been proposed for our consideration.

(a) Whether on the facts and circumstances of the case and in law, the Tribunal was justified in holding that in computation of disallowance u/s 14A, there is no provision in rule 8 D of IT rules for reduction of current liability?

(b) Whether on the facts and circumstances of the case and in law, the Tribunal was right in deleting the disallowance of Rs. 49,90,503 being expenses incurred in earning the tax free dividend income?

(c) Whether on the acts and circumstances of the case and in law, the Tribunal was right in directing the AO to exclude disallowance u/s 14A for computing income from taxable security transaction for the purpose of rebate u/s 88E without appreciating the fact that the disallowance u/s 14A is related to the expenditure incurred in relation to the income not includible in total income while income from security transaction is taxable one?''

SO far as questions (a) and (b) are concerned, the Tribunal by the impugned order has remitted the issue to the file of the assessing officer for fresh consideration keeping in view the decision of this Court in the matter of Godrej and Boyce Mfg. Co. Ltd. Vs. Dy. Commissioner of Income Tax, Range 10(2) and Others, . In view of the above, no occasion to entertain questions (a) and (b) arises.

SO far as question (c) is concerned, both the Commissioner of Income Tax (A) as well as the tribunal have held that while computing the rebate available u/s 88E of the Act the disallowance made u/s 14A of the Act should not be taken into account. This according to the impugned order is that only expenditure incurred which does not form part of the total income has to be excluded. The disallowance u/s 14A of the Act as held by the Tribunal will have no bearing in computing income from taxable securities transactions for the purposes of rebate u/s 88E of the Act. The rebate u/s 88E of the Act is with regard to income from taxable security transaction and disregarding the expenditure disallowed u/s 14A to compute the income from taxable security transaction is appropriate. We find that view of the Tribunal upholding the view of CIT (A) is reasonable and calls for no interference by this Court. Question (c), therefore, is not entertained. The appeal is accordingly dismissed with no order as to costs.