Provisions of Rule 8D are not ultra virus the provision of sec 14A and do not offend Article 14 of the Constitution

Last updated: 18 May 2012

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
The assessee is a company engaged in the business of syndication of loans, placement of bond and other financial instruments. The assessee received dividend income of Rs. 21,09,430/-, which did not form part of the total income under the Act. In view of the provisions of section 14A of the Act which provides that any expenditure incurred in earning income which does not form part of the total income under the Act should not be allowed as deduction while computing total income. The AO examined the as to what would be the expenditure by the assessee in earning the dividend income which does not form part of the total income under the Act. The AO relying on the decision of the Hon’ble Special Bench of Mumbai ITAT in the case of ITO vs. Daga Capital Management Pvt. Ltd., wherein it was held that Rule 8D, which was introduced w.e.f. A.Y 2008-09 was retrospective in operation, made the disallowance of expenditure under section 14 A of the Act by following the mandate of the Rule 8D of the Income Tax Rules, 1962.

Citation :
2nd Floor, Bombay Mutual Ldg., Dr. D.N. Road, Fort, Mumbai - 400 001. PAN:AAACC 5099G (Appellant) Vs. The ACIT, Cir. 2(1), Aaykar Bhavan, MK Road, Mumbai - 20. (Respondent)