TMI Blog2011 (10) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... ga Capital Management Pvt. Ltd. (SB-Mum ITAT) (b) CIT v General Insurance Corporation of India (2002) 254 ITR 203 (Bom.) (c) CIT v BSES Ltd. (2008) 113 TTJ 227 (Mum.) (d) Space Financial Services v ACIT (2008) 115 TTJ 165 (Del.) 3. Without prejudice to above, the Commissioner of Income Tax (Appeals) - I, Pune erred in not appreciating that Rule 8D was introduced as a consequence of and to give effect to sub-sections (2) and (3) of Section 14A introduced w.e.f. 01.04.2007 i.e. Assessment Year 2007-08 and consequently Rule 8D could not be applied in the Appellant Company's case for Assessment Year 2006-07. He erred in not following the ratio of the below mentioned decisions : (a)ING Investment Management (India) Pvt. Ltd. vs. DCIT ITA No.(s.) 1435 5346/Mum/2005 (b) Wimco Seedling Ltd. v. DCIT (2007) 107 ITD 267 (Del.) (TM ) 4. Without prejudice to Ground No. 1 to 3, the learned Commissioner of Income Tax (Appeals) - I, Pune while dismissing the Appellant Company's appeal erred in directing the learned Assessing Officer to verify as to whether the Appellant has incurred any expenditure by way of interest during the previous year which is not directly att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % amounting to ₹ 33,48,120/- was made on average value of investment of ₹ 66,96,24,011/-. 4. Before the Ld CIT(A), the assessee again contended that rule 8D is inserted w.e.f. 24.3.2008 as a logical corollary to the introduction of Sub-sections (2) (3) in Section 14A of the Income Tax Act 1961. It was contended that the amendment in Rule 8D is applicable from the A.Y. 2008-09 and it is never retrospective unless and until expressly specified. It was argued that even if such amendment is held to be retrospective, the application thereon can never date back prior to A.Y. 2007-08 since the basic provisions enabling the above formula i.e. Sub- section (2) (3) of Section 14A were brought on Statute by the Finance Act (2006) w.e.f. 1.4.2007 i.e. A.Y. 2007-08. The Ld CIT(A) did not agree and upheld the disallowance made by the A.O. 5. Before the Tribunal, the Ld. A.R. reiterated the submissions made before the authorities below. He submitted that the Ld CIT(A) has failed to appreciate that there was no dominant and immediate connection between the expenditure incurred and the exempt dividend received by the company and that there cannot be any adhoc disallowance out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the A.Y. 2000-01, the assessee had claimed deduction of interest amounting to ₹ 8.70 Crores on borrowed funds utilized for the business. Out of the said amount of interest, the A.O disallowed interest amounting to ₹ 2.79 Crores on the basis that the said amount was relatable to earning dividend income which are exempt u/s. 10(33) of the Act (as it then stood) and hence disallowance u/s. 14A of the Act. The Hon'ble High Court noted the findings of the Tribunal that the investment in equity shares and mutual funds were made by the assessee during the A.Ys. 1994-95 till 1998-99 and these investments have been made out of assessee's own funds and not out of the borrowed funds. The Hon'ble High Court noted further that even the investments made in the A.Y. 1999-2000 have been held by the Tribunal to be out of assessee's own funds and not out of borrowed funds. Under this background, the Hon'ble Bombay High Court has been pleased to hold as under : Save and except contending that Section 14A was not on the statute book when the Income Tax Appellate Tribunal passed orders in the assessment years prior to the assessment year in question, Counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d circumstances of the case, held the Hon'ble High Court. 9. In support of the alternative contention raised in Ground No. 3 that Rule 8D was introduced as a consequence of and to give effect to Sub-section (2) (3) of Section 14A introduced w.e.f. 1.4.2009 i.e. A.Y. 2007-08 and consequently Rule 8D could not be applied in the appellant company's case for A.Y. 2006-07, the Ld. A.R. placed reliance on the following decisions : (a)ING Investment Management (India) Pvt. Ltd. vs. DCIT ITA No.(s.) 1435 5346/Mum/2005 (b) Wimco Seedling Ltd. v. DCIT (2007) 107 ITD 267 (Del.) (TM ) (c)Godrej Boyce Manufacturing Co. Ltd. Vs. DCIT (2010), 328 ITR 81(Bom.) 10. In the case before us, the A.Y. involved is 2006-07, thus provisions of Sub- section (2) (3) of Section 14A inserted by an amendment by Finance Act (2006) w.e.f. April 1, 2007 i.e. A.Y. 2007-08 and Rule 8 D of the Income Tax Rules 1962 applicable w.e.f. A.Y. 2008-09 was also not available. We thus respectfully following the decision of Hon'ble Bombay High Court in the case of Godrej Boyce Manufacturing Co. Ltd. Vs. DCIT (Supra) hold that the amended provisions u/s. 14A and Rule 8D were not applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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