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2020 (1) TMI 1100 - HC - Income TaxAddition u/s 14A r.w.r. 8D - prospectively of rule 8D - HELD THAT - Issue raised therein has been concluded by the Supreme Court in favour of the assessee and against the revenue in the case of Commissioner of Income Tax- 5 Mumbai vs. Essar Teleholdings Ltd. 2018 (2) TMI 115 - SUPREME COURT wherein it has been held that Rule 8D of the Income Tax Rules, 1962 is prospective in operation and cannot be applied to any assessment year prior to assessment year 2008-09. In so far the present appeal is concerned, the assessment year in question is 2007-08. Therefore, in view of the decision of the Supreme Court as above, provisions of Rule 8D will not be applicable. Consequently, question No.(a) does not arise. MAT applicability to assessee bank u/s 115JB - HELD THAT - Issue covered by the decision of this Court in Commissioner of Income Tax- LTU vs. Union of India 2019 (5) TMI 355 - BOMBAY HIGH COURT wherein held sub- section 115JB as it stood prior to its amendment by virtue of Finance Act, 2012, would not be applicable to a banking company. We answer the question No.2 in favour of the assessee and against the revenue.
Issues:
1. Applicability of Rule 8D of the Income Tax Rules, 1962 to assessments prior to AY 2008-09. 2. Applicability of section 115JB of the Income Tax Act, 1961 to companies not required to prepare profit & loss account as per Part-II & III of Schedule VI of the Companies Act, 1956. 3. Retroactive effect of the amendment to section 115JB of the Income Tax Act, 1961. Analysis: 1. The first issue revolves around the applicability of Rule 8D of the Income Tax Rules, 1962 to assessments before AY 2008-09. The appellant raised the question if the Tribunal was correct in holding that Rule 8D is not applicable to such assessments. The Supreme Court's decision in Commissioner of Income Tax-5 Mumbai vs. Essar Teleholdings Ltd. clarified that Rule 8D is prospective and cannot be applied to any assessment year before 2008-09. This view was also supported by the Bombay High Court in Godrej and Boyce Manufacturing Co. Ltd. v/s. Deputy CIT. Since the assessment year in question is 2007-08, the provisions of Rule 8D are deemed inapplicable, leading to the dismissal of this issue. 2. The second issue addresses the applicability of section 115JB of the Income Tax Act, 1961 to companies exempt from preparing profit & loss account in accordance with Part-II & III of Schedule VI of the Companies Act, 1956. The Tribunal was questioned if it was correct in holding that these provisions do not apply to such companies. The Court referred to the decision in Commissioner of Income Tax- LTU vs. Union of India, which favored the assessee and rejected the revenue's stance. It was noted that every company is mandated to prepare a profit & loss account as per Part-II & III of Schedule VI of the Companies Act, 1956, for income tax purposes under section 115JB(2) of the Income Tax Act, 1961. Consequently, the Court dismissed this issue in favor of the assessee. 3. The final issue concerns the retroactive effect of the amendment to section 115JB of the Income Tax Act, 1961. The Tribunal was questioned if it was correct in holding that the amendment is not applicable to the assessment year under consideration. The Court emphasized that the amendment is clarificatory and retrospective in nature. Given the precedents and legal interpretations, the Court found no merit in the appeal and dismissed it without costs. In conclusion, the High Court of Bombay dismissed the appeal after addressing all three issues raised by the revenue, citing relevant legal precedents and interpretations to support their decision.
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