2011 (9) TMI 1168 - AT - Income Tax

Summary

Issues involved: Disallowance u/s 14A of the IT Act by wrongly applying Rule 8D of the IT Rules, 1962 for assessment year 2006-07.

Summary:
The appeal was against the Ld. Commissioner of Income Tax (Appeals) order upholding the disallowance made by the Assessing Officer u/s. 14A of the IT Act by wrongly applying Rule 8D of the IT Rules, 1962. The Assessing Officer disallowed amounts u/s. 14A read with rule 8D of the IT Rules. The Ld. Commissioner of Income Tax (Appeals) confirmed the addition. The ITAT referred to a precedent set by the Hon'ble Mumbai High Court in the case of Godrej Boyce Mfg. Co. Ltd. vs. DCIT, stating that Rule 8D was applicable only from Assessment year 2008-09, not for the present year A.Y. 2006-07. It was emphasized that even before A.Y. 2008-09, the Assessing Officer had to determine the expenditure incurred in relation to income not forming part of the total income under the Act, using a reasonable basis or method after providing the assessee with an opportunity to present relevant material. Consequently, the issue was set aside for reconsideration by the Assessing Officer in line with the High Court decision. As a result, the appeal by the assessee was allowed for statistical purposes.