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2013 (10) TMI 926 - AT - Income TaxDisallowance u/s 14A of the Income Tax Act - Constitutional validity of Section 14A( 2) & (3) of I.T.Act and Rule 8D of the Income Tax Rules – Held that:- As per Hon'ble Bombay High Court in Godrej Boyce Mfg. Co. Ltd[2010 (8) TMI 77 - BOMBAY HIGH COURT], court held that the provisions of Rule 8D were not ultra virus the provisions of sect ion 14A and it was also held that the same do not offend article 14 of the constitution. It was further held that the provision of Rule 8D was to be applied prospectively w.e.f 01.04.2007 i.e. in relation to assessment year 2008-09 and subsequent year as the memorandum explaining the provisions of the Finance Bill 2006 states that this amendment would take effect from 01.04.2007. The courts further held that even in the absence of sub-section(2) and (3) of Section 14 A and Rule 8D, the Assessig Officer was not precluded from making apportionment on account of expenditure relatable to earning of exempt income. No merit in the content ion of the assessee that no expenditure is attributable to the earning of the dividend income - Upheld the order of the CIT(A) in restricting the disallowance of Rs. 2 lacs being the expenditure attributable to the earning of tax free income. The provisions of Rule 8D are applicable w.e.f. assessment year 2008-09 and consequently have no application to the year under appeal. Accordingly, the estimates made by the Assessing Officer by applying the aforesaid provisions of Rule 8D are not warranted – Decided against the Revenue. Disallowance towards Director’s Foreign Travelling – Held that:- Assessee has filed return under fringe benefit tax and any element of personal nature gets duly covered on account of said payment. This is to mean that no separate disallowance on account of estimated expenditure of personal nature needs to be made once FBT at stipulated rates is paid. Therefore, disallowance made by the Assessing Officer is to be deleted - Assessing Officer has made addition on adhoc basis which is not permissible under the law and therefore, confirmed the order of Commissioner(A) – Decided against the Revenue.
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