Court upholds ITAT's interest disallowance order under Rule 8D for AY 2007-08, citing precedent.

The High Court dismissed the revenue's appeal challenging the Income Tax Appellate Tribunal's order on the disallowance of interest computation under Rule 8D for Assessment Year 2007-08. The Court found that the issue had already been decided against the revenue in a previous case involving the same respondent-assessee for Assessment Year 2005-06, where a fair and reasonable disallowance had been set at 2% of exempt income. As no substantial question of law arose, the Court dismissed the appeal without costs.

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Issues Involved:
Challenge to order of Income Tax Appellate Tribunal on disallowance of interest computation as per Rule 8D for Assessment Year 2007-08.

Analysis:
The High Court heard an appeal by the revenue challenging the Income Tax Appellate Tribunal's order regarding the Assessment Year 2007-08. The revenue proposed a question of law related to the computation of disallowance of interest under Rule 8D. The Court expressed initial confusion regarding the proposed question but clarified that the revenue did not contest the applicability of a previous decision. The revenue's grievance was that reasonable disallowance of expenditure in relation to exempt income should be made even for years before Rule 8D was applicable. The Court noted that for the Assessment Year 2005-06, the Tribunal had limited the disallowance to 2% of the exempt income, which was deemed fair and reasonable. An appeal by the revenue for the Assessment Year 2005-06 had previously been dismissed by the Court. The Court found that the issue raised in the proposed question had already been decided against the revenue in a previous case involving the same respondent-assessee. Consequently, the Court held that no substantial question of law arose for consideration and dismissed the appeal without any costs.

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