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Disallowance is required to be made on some reasonable basis, HC
Disallowance is required to be made on some reasonable basis, HC
Assessee earned dividend income which was claimed as exempt u/s ITA No.4242/Del/2010 10(34) of Act. AO invoked Rule 8D (of Income Tax Rules, 1962) & computed disallowance at Rs.4,10,000/- u/s 14A (of Income Tax Act, 1961). On appeal, in Maxopp Investments Ltd. Vs. CIT (2012) 347 ITR 272 (Del), has held, provisions of Rule 8D (of Income Tax Rules, 1962) are applicable only from assessment year 2008-09. It has further been held that in period anterior to that, disallowance is required to be made on some reasonable basis.-501682
Facts in Brief:
1. Assessee earned dividend income of Rs.4,12,299/- which was claimed as exempt u/s ITA No.4242/Del/2010 10(34) of the Act. The AO invoked Rule 8D (of Income Tax Rules, 1962) and computed disallowance at Rs.4,10,000/- u/s 14A (of Income Tax Act, 1961). This addition is under challenge before us.
On appeal Court held as under,
2. The assessment year under consideration is 2006-07. The Hon'ble jurisdictional High Court in Maxopp Investments Ltd. Vs. CIT (2012) 347 ITR 272 (Del), has held that the provisions of Rule 8D (of Income Tax Rules, 1962) are applicable only from the assessment year 2008-09. It has further been held that in the period anterior to that, the disallowance is required to be made on some reasonable basis.
3. In view of the judgment of the Hon'ble jurisdictional High Court on the point, we cannot approve the view taken by the AO in computing the disallowance u/s 14A (of Income Tax Act, 1961) as per the mandate of Rule 8D of the Income Tax Rules, 1962.
4. Accordingly, the impugned order is set aside on this issue and the matter is restored to the file of the AO for making disallowance u/s 14A (of Income Tax Act, 1961) on some reasonable basis as has been held by the Hon'ble jurisdictional High Court in the afore noted case.
Case Reference -Asahi Glass Ltd. , New Delhi vs Assessee.
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