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TMI Blog2023 (6) TMI 441X X X X Extracts X X X X X X X X Extracts X X X X ..... . [ 2018 (3) TMI 805 - SUPREME COURT ] - The Rule 8D has been amended vide Notification No. 43 dated 2nd June 2016. The sub- rule (2) of the amended Rule 8D, as it stands on date and which is effective from AY 2017-18, provides that the disallowance u/s Section 14A is to be computed as an aggregate. The constitutional validity of provisions of section 14A(2) and (3) read with Rule 8D has been upheld in Godrej and Boyce Mfg Co. Ltd s case [ 2010 (8) TMI 77 - BOMBAY HIGH COURT ] However, Rule 8D shall not be applicable for assessment year prior to AY 2008-09; and the AO had to enforce the provisions of section 14A(1) by determining expenditure by adopting a reasonable basis or method consistent with all relevant facts and circumstances. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a sum of Rs. 3,66,684,014/- over the years in the shares of Lakhani India Ltd. from which the dividend income was not taxable and the interest pertaining to the investments in the share capital was not allowable expenditure in view of the provisions of section 14A of the Act 1961. Similarly, the Assessing Officer disallowed interest of Rs. 3,25,674/- u/s 36(1)(iii) of the Act pertaining to the debit balances in the capital accounts of two partners namely Suman Lakhani and Kamlesh Lakhani aggregating to Rs. 21,41,072/-as on 31.03.2006 relying upon the decision of a Coordinate Bench of this Court in the case of CIT Vs. Abhishek Industries Ltd. (2006) 286 ITR 1 (P H). The Assessing Officer had observed that the withdrawals by the partne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erns with the borrowed funds. Once it is borne out from the record that the assessee had borrowed certain funds on which liability to pay tax is being incurred and on the other hand, certain amounts had been advanced to sister concerns or others without carrying any interest and without any business purpose, the interest to the extent the advance had been made without carrying any interest is to be disallowed under section 36(1) (iii) of the Act. Such borrowings to that extent cannot possibly be held for the purpose of business but for supplementing the cash diverted without deriving any benefit out of it. Accordingly, the assessee will not be entitled to claim deduction of the interest on the borrowings to the extent those are diverted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iring shares should have been proportionately disallowed by invoking section 14 of the Income Tax Act, 1961. (ii) On the facts and in the circumstances of the case, the Ld CIT(A) has erred on facts and in law in deleting the addition of Rs. 3,25,674/- made by the Assessing Officer on account of interest on debit balance of partners u/s 36(1)(ii) of the Income Tax Act, 1961 disregarding the fact that the partners had not withdrawn their own funds but the business funds which bear interest cost and in contradiction with the judgment of the Hon'ble Punjab Haryana High Court in the case of CIT Vs. Abhishek Industries Ltd. (2006) 286 ITR 1 (P H) (iii) That the appellant craves for the permission to add, delete or amend the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be worked out on reasonable basis under Section 14 (A) (1). 9. In the present case, the assessment year is 2006-07 and hence disallowance has to be worked out on reasonable basis under Section 14A. The method prescribed for the purpose of section 14A of the Act is contained in Rule 8D of the Income Tax Rules, 1962 ( the Rules ). Rule 8D had been inserted vide Notification 45 of 2008 and has been held to be prospective in nature i.e. applicable from AY 2008-09. [See CIT vs. Essar Telehodings Ltd. (2018) 401 ITR 445 (SC); Maxopp Investment Ltd. vs. CIT (2018) 402 ITR 640 (SC).] The Rule 8D has been amended vide Notification No. 43 dated 2nd June 2016. The sub- rule (2) of the amended Rule 8D, as it stands on date and which is effecti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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