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February 26, 2009 (Date of publication) |
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S. 14A disallowance under Rule 8D cannot exceed original disallowance
Where the AO made a disallowance u/s 14A by estimating 10% of the expenses as being attributable to the tax free receipts and in the appeal before the Tribunal the department argued that in view of the judgement of the Special Bench of the ITAT in Daga Capital 26 SOT 603 the matter had to be remanded to the AO for applicability of Rule 8D and the judgement in Assam Travels 199 ITR 1 (SC) was relied on to contend that the remand could result in a larger disallowance than had been calculated by the AO, HELD that:
(i) While the matter had to be remitted to the AO to recalculate the disallowance under Rule 8D as held by the Special Bench, the assessee could not be worse off than it would have been if it had not filed an appeal against the assessment order. Accordingly, the AO was directed to restrict the disallowance to the original figure.
(ii) The ratio of Assam Travels was not applicable to the facts of the case.
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