2016 (10) TMI 345

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....r the asstt. year 2006-07 read as under :- 1. "On the facts & in the circumstances of the case, the Ld. CIT(A) has erred in restricting the disallowance of Rs. 89,30,000/- made by the AO u/s 14A to Rs. 1,46,397/-. 1.1 On the facts & in the circumstances of the case, the Ld. CIT(A) has erred in restricting the disallowance of Rs. 1,46,397/- ignoring the fact that Rule 8D could not applied since the same was not applicable in the assessment year in question." 3. We have heard the arguments of both the sides and carefully perused the relevant material placed on record. Ld. Sr. DR submitted that the Ld. CIT(A) has erred in restricting the disallowance of Rs. 89,30,000/- made by the AO u/s 14A of the Income Tax Act 1961 ( fo....

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....not correct and bad in law as Rule 8D applies from asstt. year 2008- 09 onwards. Furthermore, from the relevant operative part of the impugned order of the CIT(A) we observe that the Ld . CIT(A) granted relief to the assessee with following observations and conclusions :- "Now adverting to the case of the appellant company, it is seen that during the relevant assessment year the investment in the mutual funds (with growth option) has gone to Rs. 191,33,20,101/- as on 31.03.2006 in comparison to the investments of Rs. 1,97,97,88,755/- as on 31.03.2005 . Thus there was an decrease in the investments of Rs. 6,64,68,654. During the relevant assessment year, the appellant has claimed to have made investments in mutual funds from its own....

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....CBDT) vide Notification No. 45/2008, dated March 24th, 2008 prescribed the method for determining the expenditure to be disallowed under section 14A in relation to income not forming part of the total income by inserting Rule-8D in the Income-tax Rules. Thus during the relevant assessment year 2006-07, there was no rule prescribed for making the disallowance u/s 14A of the I.T.Act. As discussed above, Rule 80 of the I.T.Rules is applicable from 01.04.2008 and it has no retrospective application as held by the Hon'ble High Court of Mumbai in the case of Godrej Boycee & Co. Pvt Ltd. (supra). It is further observed that the Assessing Officer has disallowed an amount of Rs. 89,30,000/- u/s 14A based on a formula which is not a widely accept....