Any sec of the IT Act 1961 cannot be applied before the date in which it came into existence

IN THE INCOME TAX APPELLATE TRIBUNAL

MUMBAI BENCHES “C”, MUMBAI

BEFORE SHIRI D. MANMOHAN, V.P.(MZ) AND

SHRI RAJENDRA SINGH, A.M.

ITA No. : 6334/Mum/2010

Assessment Year : 2007-08

M/s. Prakash Securities Private Limited,

2, Vivek Tilak Road,

Ghatkopar (E),

Mumbai-400 077

PAN NO: AAACP 2401 K

(Appellant)

Vs.

Asst. Comm. of Income Tax-

Range 2 (2),Mumbai

(Respondent)

Appellant by: Shri Jayant R. Bhatt

Respondent by: Shri Ajay

Date of hearing: 07.02.2012

Date of Pronouncement: 07.02.2012.

O R D E R

Per RAJENDRA SINGH (AM) :

This appeal by the assessee is directed against the order dated 29.6.10 for the CIT(A) for the assessment year 2007-08. The only dispute raised in this appeal is regarding disallowance of expenses under section 14A relating to exempt income.

2. Facts in brief are that the AO during the assessment proceedings noticed that the assessee had earned dividend income of Rs.14,16,221/- which was exempt from tax but the assessee had not disallowed any expenses relating to said income. He, therefore, computed disallowance relating to exempt income under rule 8D at Rs.3,01,337/- which in appeal was confirmed by the CIT(A) aggrieved by which assessee is in appeal before the Tribunal.

3. We have heard both the parties, perused the records and considered the matter carefully. The dispute is regarding disallowance of expenses relating to exempt income under section 14A of the IT Act. Under the provisions of Section 14(2) and 14(3), expenses relating to exempt income are required to be computed as per method prescribed by the Government. The Government has since notified the method in the form of Rule 8D w.e.f. 1.4.2008. The Hon’ble Bombay High Court in the case of Godrej and Boyce Mfg. Co. vs. DCIT (328 ITR 81) have held that Rule 8D is applicable only from assessment year 2008-09 and in respect of prior years, disallowance has to be made on a reasonable basis, of both direct and indirect expenses, after allowing opportunity of hearing to the assessee. Therefore, order of CIT(A) confirming the disallowance following Rule 8D cannot be upheld as assessment year involved is 2007-08. We, therefore, set aside the order of CIT(A) and restore the matter to the file of AO for passing a fresh order after necessary examination in the light of the decision of Hon’ble Bombay High Court in case of Godrej and Boyce Mfg. Co. vs. DCIT (supra), after allowing opportunity of hearing to the assessee.

4. In the result appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 7.2.2012.

                                                 Sd/-                                   Sd/-

                                   (D. MANMOHAN)          (RAJENDRA SINGH)

                                   VICE PRESIDENT    ACCOUNTANT MEMBER

MUMBAI, Dt: 07/02/2012

Jv.

Copy forwarded to :

1. The Appellant,

2. The Respondent,

3. The C.I.T.

4. CIT (A)

5. The DR, C - Bench, ITAT, Mumbai

//True Copy//

                                                                                                    BY ORDER

                                                                                                    ASSISTANT REGISTRAR

 ITAT, Mumbai Benches, Mumbai