CIT Vs. STATE TRADING CORPORATION LTD.

JUDGEMENT

(1.) THE revenue is aggrieved by an order of the Income Tax Appellate Tribunal (ITAT) dated 28.10.2011 in ITA No. 822/Del/2010 and 3747/Del/2010. The question of law urged on its behalf in this appeal is the correctness of the Tribunal's order, rejecting its contention that a remand to work out a disallowance under Section 14A of the Income Tax was necessitated in this case. The facts necessary for the purposes of this case are that the assessee had during the relevant assessment year earned tax exempt income of Rs. 8,19,59,395/ - which included tax free income of Rs. 2,27,00,240/ -. The assessee did not furnish details of separate expenses pertaining to the earning of its exempted income. The AO disallowed Rs. 89,55,000/ - working out the expenses under Section 14A. The assessee's appeal to the CIT (A) was substantially allowed and its contention of offering disallowance of Rs. 37,000/ - towards probable indirect expenditure was upheld. Consequently, the disallowance of Rs. 89,55,000/ - was set aside. The revenue's appeal was dismissed by the Tribunal. The revenue had relied upon the decision of the Bombay High Court in Godrej & Boyce v. DCIT, : 328 ITR 81. The Tribunal rejected the revenue's contentions on the premise that the assessee had adequate resources to invest its amounts and that the investments which had yielded the dividend were made in earlier years. The ITAT, therefore, felt that there was no need to remit the matter on account of the Bombay High Court's decision.

(2.) LEARNED counsel for the Revenue contended that the approach and findings of the Tribunal are contrary to the decision of a Division Bench of this Court in Maxopp Investment Ltd. v. CIT,, (2011) 203 Taxman 364 (Delhi) and that even though Rule 8D was inapplicable, nevertheless, disallowance had to be worked out in terms of Section 14A. It was emphasized that the judgment of the Division Bench of this Court in Maxopp Investment was categorical that in such matters where Rule 8D had been previously applied, the remand was in order.

(3.) THE Court has considered the submissions.