TaxTMI 
TaxTMI 
2016 (1) TMI 1355
X X X X Extracts X X X X
X X X X Extracts X X X X
....firming the disallowance of Rs. 45,24,390/- under Section 14A read with Rule 8D. 2. Both the lower authorities erred in holding that Rule 8D was to be applied retrospectively. The appellant submits that Rule 8D is substantive law, and cannot be applied retrospectively. 3. Both the lower authorities erred in invoking that Rule 8D, without recording any objective satisfaction as to how the appellant's submission was erroneous. 4. Both the lower authorities erred in applying sub-sections (2) and (3) of section 14A, while computing Book Profit u/s 115JB. Having regard to the facts and circumstances of the cas4e and the provisions of law, the appellant submits that the Assessing Officer be directed to exclude disallowance made u./s 14A ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,549/- u/s 115 JB of the Act by adding Rs. 46,39,435/- u/s 14A read with Rule 8D of the Act comprising of Rs. 24,44,070/- under rule 8D(ii) on account of interest and Rs. 21,95,365/- under rule 8D(iii) on the basis of average investments on the ground that assessee received dividend income of Rs. 4,76,68,340/- and disallowance u/s 14A rule 8D of Rs. 10,31,305/-was made by the assessee being expenses pertaining to the exempt income and worked out the aforesaid disallowance of Rs. 46,39,435/- vide para 3 of the assessment order. 3. Aggrieved by the order the AO, the assessee carried the matter before the CIT(A) who confirmed the addition to the tune of Rs. 45,24,390/- on the ground that the assessee himself submitted the calculation of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld Counsel further submitted that the loan funds had substantially decreased during the year from Rs. 5,80,06,448/- to Rs. 59,63,482/-. As regards the disallowance under rule8D (iii) the ld. Counsel submitted that the total expenses charged to the Profit and Loss A/c were Rs. 84,63,105/- and out of the said expenditure, the assessee had, suo motto, disallowed while filing the return of income a sum of Rs. 10,31,305/- thereby restricting claim of expenses of Rs. 74,34,800/-. It was also pointed out that appellant was fully engaged in the business of share trading, speculation, and financing, and that dividend was a passive earning where the amounts were credited directly to the bank account, without any effort. The ld. Counsel finally prayed....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... have heard the rival submissions and perused the material on record. We find from the order of the authorities below that disallowance of Rs. 23,58,695/- was confirmed by the CIT(A) under rule 8D (ii) and Rs. 21,65,696/- under Rule 8D (iii) being half percent on average investment from the audited account of the assessee. It is clear that the total shareholder's funds as on 31.03.2007 were Rs. 65.30 crores whereas the total investments as on that date was Rs. 49.65 crores. We are in agreement that the submissions of the ld. Counsel for the assessee that the investments were made out of owned funds of the assessee and therefore, the disallowance made u/s 14A read with Rule 8D(ii) of Rs. 23,58,695/- were wrong and against the law as laid ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch the investments was made and the deletion of disallowance u/s 14A read with Rule 8D was justified. The case of the assessee is squarely covered by the above decisions and we, therefore, delete the disallowance of Rs. 23,58,695/- on account of interest made under rule 8D(ii). As regards the disallowance u/s 14A read with Rule 8D(iii) of Rs. 21,65,696/-, it is pertinent to state that Rule 8D was made applicable w.e.f. AY 2008-09. We are of the view that Rule 8D is not applicable to the AY 2007-08 in view of the judgment of the Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. CIT (328 ITR 81) (supra). Moreover, the disallowance of Rs. 21,65,696/- was excessive. We, therefore, set aside the order of the CIT(A) and restore ba....