2012 (10) TMI 130

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.... also apply to A.Y. 2007-08." (2)  Provisions of Rule 8D were inserted by the Income Tax (Fifth Amendment) Rules 2008 w.e.f. 24.3.2008. That means, they were applicable for A.Y. 2008-09 and onwards. (3)  The learned Commissioner of Income Tax (A) has erred in law and in facts in applying the provisions of section 14A r/w Rule 8D to the facts of the case of the Appellant in relation to tax-free income (dividend) for the A.Y. 2007-08. Without prejudice to ground Nos. 1,2&3 above additional grounds :- (4)  The learned Commissioner of Income Tax (A) has erred in law and in facts in rejecting the claim of the Appellant that no expenses were incurred in relation to earning of tax free dividend income. (5) The learned....

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....utomatic. (11)  The appellant craves leave to add, alter, amend or delete any ground or grounds of appeal on or before the date of hearing. 2. The solitary issue is with regard to the applicability of Rule 8D and computation of allowable expenses as per section 14A of the I.T. Act, 1961. 3. The basic facts are that the assessee has claimed dividend income of Rs. 2,25,000/- and claimed the same to be exempted u/s 10(34). The Assessing Officer by applying the ratio as propound in the case of ITO v. Daga Capital Management (P.) Ltd. [2009] 117 ITD 169 (Mum) (SB) computed disallowable expenses at Rs. 2,56,488/-, as per Rule 8D. 4. Aggrieved, the assessee approached learned CIT(A) who sustained the disallowance as computed by th....

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....rve that the assessee had substantial own funds and the loans standing in the balance-sheet were meant for the working capital alone and not for making investments, specifically in a circumstance, when there are no fresh investments in non business activity. The AR, therefore submitted that in the circumstances, there cannot be applicability of section 14A. 8. The Departmental Representative however relied on the orders of the revenue authorities. 9. We have heard the rival contentions and we are in agreement with the AR that Rule 8D cannot be applied, keeping in view the decision of Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. (supra). Coming now, to the issue whether at all the provisions of section 14A are ....