ITAT Mumbai Allows Appeal for AY 2007-08, Overturns Disallowance under Sec. 14A

The Appellate Tribunal ITAT Mumbai allowed the appeal for assessment year 2007-08, overturning the disallowance of &8377; 81,03,631 u/s. 14A of the Act. The Tribunal set aside the lower authorities' orders based on the Hon'ble Bombay High Court's ruling in Godrej & Boyce Mfg. Co. Ltd. Vs DCIT, stating that Rule 8D of I.T. Rule is applicable from assessment year 2008-09 onwards. The AO was directed to re-decide the disallowance after providing the assessee with a hearing and considering the evidence. The appeal was allowed for statistical purposes.

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Issues involved: Disallowance u/s. 14A of the Act.

Summary:
The Appellate Tribunal ITAT Mumbai heard an appeal for assessment year 2007-08 against the order of Ld. CIT(A) regarding the disallowance of &8377; 81,03,631 u/s. 14A of the Act. The AO had made the disallowance following a decision of the Special Bench in the case of Daga Capital Management Pvt. Ltd. The Ld. CIT(A) confirmed the AO's action in the first appeal.

However, the decision of the Special Bench was reversed by the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs DCIT, holding that Rule 8D of I.T. Rule is prospective and applicable from assessment year 2008-09. Consequently, the Tribunal set aside the orders of the authorities below and directed the AO to re-decide the disallowance, if any, in respect of exempted income after giving the assessee a hearing and considering the evidence. The appeal by the assessee was allowed for statistical purposes.

The order was pronounced on the 2nd day of December 2011.

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