Before the date rule 8D come into existence sec 14A(1) applied to determine the expenditure incurred for income not forming part of the taxable income

Last updated: 18 February 2012

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
We have heard the learned counsel for the assessee and the ld. Departmental Representative and considered their submissions carefully. Ld. C.I.T.(A) came to the conclusion that Rule 8D of I.T. Rules will not apply for this assessment year and Rule 8D of the Rules comes into force w.e.f. March 24, 2008, which would apply w.e.f. the subsequent assessment year 2008-09. When Rule 8D was not applicable, the A.O. had to enforce the provisions of sub-sec. (1) to Sec. 14A of the Act. The A.O. is duty bound to determine the expenditure which has been incurred in relation to income which does not form part of the total income under the Act. The A.O. must adopt a reasonable basis or method consistent with all the relevant facts and circumstances after affording a reasonable opportunity to the assessee to place all germane material on record. While finding so, the Hon’ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd. vs. DCIT, reported as 328 ITR 81 (Bom) remanded the matter to the A.O. to determine as to whether the assessee had incurred any expenditure (direct or indirect) in relation to exempted income.

Citation :
Ajnani Chatravhuj Sampat, Kolkata. (PAN-ALWPS0513P) …………..APPELLANT) Versus Asstt.Commissioner of Income-tax Circle-31, Kolkata………………………..RESPONDENT)