INCOME TAX ACT, 1961

Section 14A Rule 8

Disallowance under section 14A - Expenditure against exempt income - Period prior to introduction of rule 8D - Reasonable disallowance of expenditure

This was second round of litigation and in the first round of litigation an addition of Rs. 29,41,000 on account of disallowance of expenditure incurred in relation to earning of an exempt income was made by invoking provisions of section 14A read with rule 8D of the IT Rules, 1962. It is pertinent to mention that impugned assessment year was assessment year 2006-07 which was prior to assessment year 2008-09.Held: Rule 8D of the 1962 Rules is prospective being applicable from assessment year 2008-09 onwards. It was not shown by DR as to how factual matrix in assessment year 2006-07 was different from that of assessment year 2007-08. Both the years were prior to assessment year 2008-09 from where onwards rule 8D of the 1962 Rules was held to be applicable. Thus, Following the decision of Tribunal in assessee's own case in ITA No. 1304/Mum/2011 for assessment year 2007-08 vide order dt. 29-7-2016 , end of justice will be met in this case if disallowance of expenses incurred in relation to earning of an exempt income under section 14A ,be restricted to 2% of dividend income.

Followed:Goderj & Boyce Manufacturing Company Ltd. v. Dy. CIT (2010) 328 ITR 81(Bom.) : 2010 TaxPub(DT) 2182 (Bom-HC), CIT v. Essar Teleholdings Ltd., vide judgment dt. 31-1-2018 (2018) 401 ITR 445(SC) : 2018 TaxPub(DT) 652 (SC) and assessee's own case for assessment year 2007-08 in ITA No. 1304/Mum/2011 vide orders dt. 29-7-2016. Applied:Radhasoami Satsang v. CIT (1992) 193 ITR 321(SC) : 1992 TaxPub(DT) 858 (SC).

REFERRED :

FAVOUR : In assessee's favour (partly).

A.Y. : 2006-07

INCOME TAX ACT, 1961

Section 234C Section 234D

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