2019 (1) TMI 960

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....om ITA No. 212 of 2017. 3. The revenue has filed the present appeal under Section 260A of Income Tax Act, 1961 (for brevity, 'the Act') against the order of Income Tax Appellate Tribunal, Chandigarh (hereinafter referred to as 'Tribunal') passed in ITA No.511/Chd/2011 dated 28.08.2014 for the assessment year 2006-07. 4. Appellant-revenue has claimed following substantial questions of law :- i) Whether on the facts and circumstances of the case, the Hon'ble ITAT was justified in restricting the disallowance made u/s 14A from Rs. 1,09,32,198/- to Rs. 5 lakhs without any sound and valid reason? ii) Whether on the facts and circumstances of the case, the Hon'ble ITAT was justified in rejecting the method for calcul....

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.... order dated 30.04.2009 sustained the additions made by disallowing expenses under Section 14A of the Act. The assessee preferred a further appeal before the Tribunal. The appeal of the assessee was partly allowed vide order dated 28.08.2014. The Tribunal followed the decision of the Bombay High Court in case of Godrej and Boyce Mfg. Co. Ltd. vs. Dy. CIT, 2010 (328) ITR 81 (Bom) and held that Rule 8D of Rules was not applicable during the relevant assessment year. The Tribunal, however, held that only a reasonable disallowance can be made and after considering the facts sustained disallowance of Rs. 5 lakhs under Section 14A of the Act. Hence the present appeal. 7. Heard learned counsel for the parties. 8. Learned counsel for the appellan....

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....and (ii) an amount equal to one per cent of the annual average of the monthly averages of the opening and closing balances of the value of investment, income from which does not or shall not form part of total income: Provided that the amount referred to in clause (i) and clause (ii) shall not exceed the total expenditure claimed by the assessee." 46. The method for determining the amount of expenditure brought in force w.e.f. 24.03.2008 has been given a go bye and a new method has been brought into force w.e.f. 02.06.2016, by interpreting the Rule 8D retrospective, there will be a conflict in applicability of 5th & 14th Amendment Rules which clearly indicates that the Rule has a prospective operation, which has been prospectively ....

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....l statute and looking into the nature and purpose of subsection (2) and sub section (3) of Section 14A as well as purpose and intent of Rule 8D coupled with the explanatory notes in the Finance Bill, 2006 and the departmental understanding as reflected by Circular dated 28.12.2006, we are of the considered opinion that Rule 8D was intended to operate prospectively. 49. It is relevant to note that impugned judgment in this appeal relies on earlier judgment of Bombay High Court in Godrej and Boyce Mfg. Co. Ltd. vs. Dy. CIT, (supra) where the Division Bench of the Bombay High court after elaborately considering the principles to determine the prospectivity or retrospectivity of the amendment has concluded that Rule 8D is prospective in natu....