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TMI Blog2015 (1) TMI 1298X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer (AO) of Rs. 23,49,015/- u/s. 94(7). b) The learned AO erred in law in appreciating that the concept of record date, as envisaged in Explanation (aa) to Section 94, is not applicable in respect of daily dividend schemes. 2) a) The learned CIT(A) erred in facts and law in upholding the disallowance made by the AO of Rs. 94,09,045/- by invoking the provisions of section 14A r.w.r. 8D of the I.T. Rules. b) The learned AO erred in law in applying Rule 8D without giving any specific finding and reasons as to inadequacy of disallowance made u/s. 14A by the appellant in the return of income filed and appreciating explanations offered during the course of assessment proceedings or controverting that the explanations of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital loss of Rs. 23,49,015/- u/s. 94(7) by way of a revised computation of total income filed before the A.O considering the same, the A.O. also accepted the disallowance of the short term capital loss of Rs. 23,49,015/- u/s. 94(7). The contention of ld. AR was that the Assessing Officer had erroneously accepted the disallowance without appreciating the fact that the dividend income was earned from the Daily dividend scheme of Mutual fund, wherein the provisions of section 94(7) are not applicable at all in view of the absence of record date of dividend as envisaged in the sec. 94(7). All the facts and details of the dividend income earned from the Daily Dividend scheme of mutual fund was also on record. 3.2 We found that exactly simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proximate expenses in relation to exempt income earned. Further, as regards to all the investments made during the year under reference, it was submitted that these investments are made out of own surplus capital and not out of borrowed funds. Also, the borrowed funds are specifically utilised wholly and exclusively for the purpose of business. Hence, no disallowance of interest expenditure is required to be made as per the provision of section 14A. Further, it was also submitted that the investments are .either in subsidiary companies in the form of strategic business investments or in the Daily Dividend schemes of mutual funds, wherein the investor does not have to apply his mind in anyway. The only effort involved in Investment is that o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce u/r.8D when there is any investment for strategic purposes, has been dealt by the ITAT Delhi Bench in the case of Interglobe Enterprises Ltd., ITA No.1362&1032/Del/2013, order dated 4-4-2014, wherein the Tribunal observed as under :- "However, we find that the calculation of disallowance under Rule 8D(iii) made by the Assessing Officer and upheld by Ld CIT(A) is not correct In view of the fact that Assessing Officer had included the value of total investments for calculation of disallowance whereas in our opinion the value of those investments should have been included which were made for the purpose of earning exempt income. The assessee had made significant investments in the shares 'of subsidiary companies which are definitely n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used to take care of cases where there is the issue of dividend striping. iv) Under Rule 8D(2)(iii), what is disallowable is an amount equal to ½ percentage of the average value of investment the income from which does not or shall not form part of the total income/. Thus, under sub clause (iii), what is disallowed is ½ percentage of the numerator B in Rule 8D(2)(iii). This has to be calculated on the same lines as mentioned earlier in respect of Numerator B in the Rule 8D(2)(ii). Thus, not all investments become the subject matter of consideration when computing disallowance u/s 14Aread with Rule 8D. The disallowance u/s 14A read with Rule 8D is to be in relation to the income which does not form part of the total income an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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