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2011 (9) TMI 1031 - AT - Income TaxDisallowance u/s 14A - Held that:- We find that this issue is now covered by the decision of Hon’ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] wherein it has been held that Rule 8-D is applicable for assessment year 2008-09 and onwards. We also find that Hon’ble Bombay High Court has further held that the assessing officer had to enforce the provisions of section 14A(1) and for that purpose, the assessing officer was duty bound to determine expenditure which has been incurred in relation to income which did not form part of total income under the Act by adopting a reasonable basis or method consistent with all relevant facts and circumstances. CIT (Appeals) was not justified in invoking the provisions of Rule 8-D for assessment year 2006-07, which is under consideration. However, since the disallowance under section 14A is to be made in respect of the expenditure incurred in relation to the exempted income, we feel it proper to set aside the matter to the file of the assessing officer with the directions to determine the disallowance of the expenditure relatable to the exempt income in the light of decision of Hon’ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. (supra). The assessing officer is directed accordingly.
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