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2023 (6) TMI 441 - HC - Income TaxDisallowance u/s 14A r.w.r. 8D - method prescribed for the purpose of section 14A - working on reasonable basis - HELD THAT:- In the present case, the assessment year is 2006-07 and hence disallowance has to be worked out on reasonable basis u/s 14A. The method prescribed for the purpose of section 14A of the Act is contained in Rule 8D of the Income Tax Rules, 1962. 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 (2) TMI 115 - SUPREME COURT] and Maxopp Investment Ltd. [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. Thus, the Tribunal, vide impugned order had rightly partly allowed the appeal of the assessee by giving direction to work out the disallowance on reasonable basis.
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