2014 (4) TMI 394

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....erage cost of funds method and make disallowance of Rs. 88. 08 Crores as against disallowance of Rs. l05. 36 Crores made as per provision of Sec. 14A of the IT Act ?". 2. "whether on the facts and the circumstances of the case and in law the CIT(A) is right in deciding the issue relying on the judgment in the case of M/S Godrej & Boyce Manufacturing Company Ltd. When the decision was not accepted by the Revenue Challenged before the Apex Court?" Grounds of appeal raised by the assessee read as under: 1. The CIT(A) erred in confirming the disallowance made by AO under section 14A of the Income Tax Act to the extent of Rs. 88. 08 crores based on average cost of funds basis. 2. The CIT (A) erred in confirming the addition made by t....

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....Rule 8D was not applicable retrospectively, that AO had applied average cost of funds method, for making disallowance u/s 8D for the AY 2004-05, that according to the method appplied by the AO for the assessment year 2004-05 disallowance worked out to Rs. 88. 08 Crores as against the disallowance of Rs. 105. 36 Crores. Assessee filed a working of Rs. 88. 08 Crores before the FAA along with the copies of the assessment orders for the AY 2004-05 and 2005-06. After considering the submissions of the assessee, he held that in view of the decision of the Hon'ble Mumbai High Court in the case of Godrej & Boyce Manufacturing Co. Ltd. (328 ITR 81) Rule 8D could not be applied for the AY 2007-08, that some reasonable disallowance had to be made to f....

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....ubmitted that identical issue was decided in favour of the assessee-company by the Tribunal in the earlier AY. s. We find that while deciding the appeal for the year 2006- 07(supra) Tribunal had held as under: "10. We have carefully considered the findings and the observations given by the ITAT in assessee's own case for the Assessment Year 2005-06, wherein it has been observed and held as under:- As already held in ground no. 1 the provisions of Rule 8D are not applicable to the present A. Y. under consideration. Therefore, disallowance of expenditure by applying Rule 8D is not justified. Further, no actual expenditure was debited in the profit and loss account relating to the earning of exempt income. Therefore, the provisions of Se....