2014 (2) TMI 1032

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....in holding that the provisions of sub-sections (2) and (3) inserted in Section 14A of the Income Tax Act, 1961 with effect from April 1, 2007 and rule 8D inserted in the Income Tax Rules, 1962 on March 24, 2008 were procedural and retrospective and were applicable for the assessment years 2001-02, 2004-05 and 2005-06 ? ii) Whether and in any event the Tribunal was justified in law in holding that it had no jurisdiction to adjudicate upon the legality and/or validity of rule 8D of the Income Tax Rules, 1962 ? iii) Whether the Tribunal was justified in law in not following its order for the assessment year 2002-03 and in upholding the disallowance under Section 14A made in the assessments for the assessment years 2001-02 and 2005-06 and tha....

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....t a Special Bench of the Income Tax Appellate Tribunal, in the case of ITO vs. Daga Capital Management Pvt. Ltd., held that Rule 8D was procedural in nature and therefore, was retrospective in effect. The learned Tribunal on that basis concluded that since they were bound by the views expressed by the Special Bench and considering that the learned Tribunal was not in a position in law to enhance the amount of expenditure disallowed, they chose to reverse the order passed by the CIT(A). The facts and circumstances with respect to the assessment years 2004-05 and 2005-06 were also identical. In that view of the matter, in all the aforesaid assessment years the orders passed by the CIT (A) were reversed by the learned Tribunal. In this backdro....

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....h Court was followed and the following views were expressed : "We are of the view that rule 8D would operate prospectively. We agree with the submissions made by Dr. Rakesh Gupta that if the said rule were to have retrospective effect, nothing prevented the Central Board of Direct Taxes from saying so, particularly, in view of the fact that it had the power to make a rule retrospective by virtue of section 295(4) of the said Act. Instead of making rule 8D retrospective, clause 1(2) of the Income Tax (Fifth Amendment) Rules, 2008, made it clear that the rules would come into force from the date of their publication in the Official Gazette. It is, therefore, clear that rule 8D, which was introduced by virtue of Notification No.45 of 2008, da....