2011 (2) TMI 1400

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....a) to 1(c) are directed against the CIT(A)'s order in confirming the disallowance u/s 14A of Rs. 19,58,253/- on account of expenditure incurred to earn exempt dividend income, by applying the provision of Rule 8D. 3. In this case, the assessee filed its return of income on 31.10.2007 showing total income at `Nil'. The case was selected for scrutiny and notice u/s 143(2) was accordingly issued and served upon the assessee. The assessee appeared, and filed replies and documents before the A.O. The assessee is in the business of providing passive infrastructure to telecom industry. During the assessment proceedings, it was noticed by the AO that the assessee has made investment of Rs. 10,00,50,000/- in the shares and mutual funds. The AO th....

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....and mutual funds. The AO has observed in the assessment order that the appellant has paid an amount of Rs. 1,11,24,120/- on account of interest expenses not attributable to any specific income are receipt. Section 14A of the I.T. Act clearly provides the expenditure incurred in relation to income not deductible from total income. Sub-sec. (2) provides the mechanism. Sub-Section (3) provides that the section is applicable in relation to case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of total income under the I.T. Act. It is noted that the special bench of Mumbai ITAT in the case of M/s. Daga Capital Management (P) Ltd. Has clearly settled the controversy regarding the....

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....e is in further appeal before us. 7. We have heard both the parties and have carefully perused the material on record. 8. On perusal of learned CIT(A)'s order, we find that the CIT(A) has confirmed the Assessing Officer's action by applying the decision of ITAT, Special Bench Mumbai in the case of Daga Capital Management Pvt. Ltd. (2008) 119 TTJ 289 (Mum.) and, has thus, applied the method provided under Rule 8D of the Income-tax Rules. At this stage, it is pertinent to note that the decision of Special Bench of Tribunal in the case of Daga Capital Management Pvt. Ltd. (supra) holding that Rule 8D is retrospective in nature, has been over-ruled by the Hon'ble Bombay High Court in the case of Godrej Boyce vs. DCIT (2010) 43 DTR 177 (Bo....

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....g the AO's action in making addition of Rs. 19,58,253/- being expenditure incurred to earn exempt income while computing book profit under sec. 115JB of the Act. 10. We have heard both the parties and have carefully perused the material on record. 11. In the present case, the AO has also made addition of Rs. 19,58,253/- on account of alleged expenditure incurred to earn exempt income while computing book profit u/s 115JB of the Act. The AO's action has been confirmed by the CIT(A). Both the authorities have applied Rule 8D of the Income-tax Rules while computing the amount of expenditure disallowable u/s 14A of the Act. As already held above, the provisions of Rule 8D are not applicable to the present assessment year under considerati....