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TMI Blog2012 (7) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 14A to Rs.1,73,98,255/- against Rs.2,04,25,115/- calculated by the AO." 2. The only issue for consideration relates to disallowance u/s 14A of the Act. The facts of the case stated in brief are that during the year under consideration the assessee company had earned dividend income of Rs.5,32,09,158/- and claimed the same as exempt to tax. The Assessing Officer required the assessee to explain as to why the disallowance in terms of sec. 14A read with Rule 8D should not be made. The assessee furnished details of working of disallowance under Rule 8D. However, as against total disallowance of Rs.1,66,57,982/- worked out by the assessee, the AO made disallowance of Rs.2,04,25,115/-. 3. On appeal it was submitted by the assessee before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent assets should have been added to the value of investments. Therefore, to this extent, I am in agreement with the Ld. counsel. However, I find that the provisions of Rule 8D of the IT Rules, 1962 have been held to be prospective in nature and thus, are not applicable to the subject assessment year. Therefore, in light of the judgments of Mumbai High Court and the Hon'ble Jurisdictional Delhi High Court, the decision with respect to disallowance u/s 14A has to be taken on the basis of reasonableness and individual facts of a particular case. In the present case, the appellant has suo moto disallowed a sum of Rs.17398255/- in the proportion of exempt and taxable income earned by way of dividend and interest income. In my view, the disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndirect expenditure incurred in relation to income which does not form part of total income. Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd. vs. DCIT, 328 ITR 81, has held that provisions of Rule 8D which have been notified with effect from 24th March, 2008 would apply with effect from Assessment Year 2008-09. Even prior to Assessment Year 2008-09 when Rule 8D was not applicable, the AO had to enforce provisions of sub-sec.(1) of sec. 14A. For that purpose the AO was duty bound to determine the expenditure which had been incurred in relation to income which does not form part of total income. The AO must adopt a reasonable basis or method consistent with all the relevant facts and circumstances after furnishin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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