$ 10 * IN HIGH COURT OF DELHI AT NEW DELHI + ITA 497/2014 COMMISSIONER OFINCOME TAX, DELHI-I ..... Appellant Through: Mr. Kamal Sawhney, Sr. Standing Counsel. versus MIS BHARTI TELETECH LTD. ..... Respondent Through: Mr. Kaanan Kapur, Advocate. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE R.K.GAUBA ORDER % 18.02.2015 Issue notice. Mr. Kaanan Kapur, Advocate accepts notice. With consent of counsel for parties, matter was heard finally. question of law which Revenue urges in this appeal - directed against order of ITAT dated 7.3.2014 in ITA No. 4958/Del/2012 - is whether addition sustained and ordered by CIT (A) under Section 14A of Income Tax Act, 1961, was correctly cancelled. assessee had in its return for AY 2006-07 claimed tax exempt income to tune of Rs.64,06,098/-. Concededly, at that point in time, Rule 8D of Income Tax Act was not framed and was not in force. Assessing Officer (AO) disallowed sum of Rs.12,31,562/- as against sum admitted by assessee of Rs.3,95,321/- and sought to bring in tax. It is not in dispute that rationale for doing so is application of Rule 8D, which, as noticed earlier, was not in force at that point in time. assessee s appeal was rejected. CIT (A) proceeded on fresh determination of amounts which had to be, according to him, disallowed. In doing so, CIT (A) added back or disallowed certain amounts claimed by Directors as expenses in part of previous year in question. assessee s further appeal to ITAT succeeded. ITAT reasoned that addition was made by summary application of Rule 8D which was clearly inapplicable in given year. It also noticed that CIT (A) had merely made some ad hoc estimates of Director s remuneration, administrative and other expenses and consequently directed deletion of amount. During hearings, learned counsel for Revenue urged that once ITAT found that AO s determination was based upon Rule 8D, ITAT ought to have considered merits of CIT (A) s determination, which was de hors application of Rule 8D. Not having done so, least that ought to have been done was to remit matter for fresh consideration by AO. Learned counsel for assessee urged on other hand that AO had completely ignored submissions made with respect to merits of disallowance besides also ignoring that Rule 8D did not apply in circumstances of case. It is evident from above discussion that AO in above case applied Rule 8D when clearly it was not permissible for him to do so for simple reason that provision itself was not in existence for relevant assessment year. CIT (A) s appellate assessment noticed this but made fresh determination as to exact disallowance which was also broadened to include other amounts. ITAT ought to have really addressed itself to this or in alternative remitted matter to AO for fresh determination once it noticed irregularity in decision, which was infused on account of Rule 8D s application. That matter should be examined afresh by AO, who shall deal with all contentions raised by parties, and deal with them on merits, both as to correct principle to be applied in facts of this case given that Rule 8D was inapplicable as well as amounts which are legitimately to be included under Section 14A. Appeal is accordingly allowed in above terms. Parties are left to bear their own costs. S. RAVINDRA BHAT, J R.K.GAUBA, J FEBRUARY 18, 2015 /vikas/ Commissioner of Income-tax, Delhi-I v. Mis Bharti Teletech Ltd