R. S. Syal, AM

1. These two appeals by the assessee relates to the Assessment Year 2006-07. Firstly, we are taking up ITA No. 5004/Mum/2010 which has been filed against the order passed by the learned CIT (A) on 19.04.2010.The only ground taken in the memorandum of appeal is about the confirmation of disallowance of interest on estimate basis at ` 2.2,00,000/- out of total interest paid of ` 2.21,44,669/-.

2. Briefly stated the facts of the case are that the assessee showed an interest receipts at ` 2.37.28 lakhs against which deduction was claimed for interest payment of ` 2.21.44 lakhs. The A.O. noted that the assessee was paying interest at about 10 to 12%, whereas he has charged interest at a very low rate of about 2.59% on loan advanced to M/s. Goodluck Electronics P. Ltd., in which the assessee is a Director. Relying on view taken by him in the immediately preceding year i.e. A.Y. 2005-06, the A.O. made a disallowance of ` 2.2,00,000/-, which came to be upheld in the first appeal.

3. We have heard the rival submissions and perused the relevant material on records. It is observed that the said earlier Assessment Year 2005-06 came up for adjudication before the Tribunal in ITA No. 7271/Mum/2008. Vide its order dated 30.11.2007, a copy of which is available on record, the Tribunal has restored this issue to the file of the A.O. for a fresh adjudication. As both the sides are in agreement with the facts and the circumstances of the addition made and sustained in the current year are mutatis mutandis similar to those of the preceding year, in our considered opinion it will be just and fair if the impugned order on this issue is set aside and the matter is restored to the file of the A.O. We order accordingly direct him to decide this issue afresh in accordance with the directions given by the Tribunal in its order for the said earlier year.

4. The assessee has raised an additional ground about the disallowance made u/s. 14A. No objection was taken by the learned DR on the admission of this additional ground. Since such ground emanates from the impugned order and involves a question of law to be decided, we admit this ground and take it up for disposal on merits.

5. The facts of this ground are that the assessee earned certain exempt income and no disallowance was offered u/s.14A. The A.O. made such disallowance at ` 2.25,000/-. When the matter came up before the learned CIT (A), he directed the A.O. to work out the disallowance in accordance with Rule 8D of the Income Tax Rules, 1962.

6. Having heard both the sides and perused the relevant material on record it is observed that the assessment year under consideration is 2006-07. The Honble Jurisdictional High Court in the case of Godrej 85 Boyce Manufacturing Company Ltd. vs. DCIT : 2010 328 ITR 81 (Bom.) has held that Rule 8D cannot be applied in respect of any year prior to A.Y. 2008-09. In that case, the Honble High Court has directed the A.O. to work out the disallowance u/s. 14A on some reasonable basis without having any regard to Rule 8D. Since the year involved before us is not covered by the mandate of Rule 8D, in our considered opinion, the direction of the learned CIT(A) for applying Rule 8D cannot be sustained. The learned AR did not raise any objection to the sustenance of an addition at ` 2.25,000/- as was made by the A.O. in the original assessment. We, therefore, uphold the disallowance at ` 2.25,000/- as made by the A.O. in the order passed u/s.143(3). This ground is allowed to this extent.

7. In the result, the appeal is partly allowed

8. ITA No. 2529/Mum/2011 being the other appeal filed by the assessee for the same assessment year i.e. A.Y. 2006-07 was not pressed by the learned AR. The same, therefore, stands dismissed. In the result, this appeal is dismissed

Order pronounced on this of 09th May, 2012.