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TMI Blog2019 (7) TMI 1531X X X X Extracts X X X X X X X X Extracts X X X X ..... to the file of the AO for limited purpose to restrict the disallowance u/s 14A to the extent of exempt income and allow the grounds of appeal are allowed for statistical purposes. - ITA Nos.317 & 318/Bang/2019 And ITA No.537/Bang/2019 - - - Dated:- 15-7-2019 - SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER For The Appellant : Shri Sunil Jain, CA For The Respondent : Dr.P.V.Pradeep Kumar, Addl.CIT (DR) ORDER Per PAVAN KUMAR GADALE, JM: Both the assessee and the revenue have filed cross appeals against the order of the CIT(A)-II, Bengaluru, for the assessment year 2014-15 passed u/s 143(3) and 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3. The appellant therefore prays that the CIT(A) / Assessing Officer be directed to restrict the amount of disallowance U/s 14A rwr 8D to the extent of exempt income of ₹ 5,86,500/- earned by the appellant during the year. WITHOUT PREJUDICE TO THE ABOVE: Ground II: Disallowance u/s 14A 1. On the facts and in the circumstances of the case and in law, the overall amount of disallowance under section 14A rwr 8D cannot exceed the amount of exempt income earned during the relevant year. WITHOUT PREJUDICE TO THE ABOVE: Ground III: Disallowance u/s 14A 1. On the facts and in the circumstances of the case a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al statements found that the assessee has earned income from dividend and has claimed as exempt. The AO observed that the assessee had made certain investments and there is possibility that to maintain investments, managers, staff, administrative expenses must have been incurred. AO further mentioned at para.3.3 that the assessee has made disallowance of ₹ 42,50,04,939/- under the provisions of section 14A r.w. rule 8D in determining the claim. AO, having applied the provisions and rules has calculated disallowance under rule 8D to the extent of ₹ 45,02,57,576/-. Since the assessee has already disallowed ₹ 42,50,04,939/-, AO restricted the disallowance to sum of ₹ 2,52,52,640/-. Whereas the assessee has made submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd investment in shares and securities and NFBC and has income by way of interest, dividend income and profit on redemption of units and profit on sale of investment. Whereas in the financial year 2013-14, relevant to assessment year 2014-15, the assessee has received dividend of ₹ 5,86,500/-. The AO made disallowance in the course of assessment proceedings overlooking the revised the disallowance which is equal to dividend income. The AO and the CIT(A) have confirmed the disallowance u/s 8D(2) and 8D(2)(iii). But the AO made disallowance of ₹ 2,54,08,001/- and the CIT(A) passed the order restricting to exempted income. The contention of the ld. AR that the assessee has made disallowance u/s 14A suo motu and revised in the cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not included in total income (Rule 8D) Assessment year 2009-10 Whether upper disallowance cannot exceed exempt income of relevant year Held, yes Whether where for year in question, finding of fact was that assessee had not earned any tax free income, corresponding expenditure could not be worked out for disallowance Held, yes Whether for computing disallowance under clause (ii) of rule 8D(2), numeral B in clause (ii) refers only to average value of entire investment that does not form part of total income Held, yes (paras 25 and 26) (in favour of assessee). Further co-ordinate bench decision in the case of M/s. Renaissance Holdings Developers Pvt.Ltd. vs. ACIT in ITA No.848/Bang/2018 held at para.6 as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Vireet investment Pvt. Ltd. anr (165 ITD 27) (SB), the contention of the assessee is accepted. Accordingly, we restore the issue back to the file of the AO for disallowance u/s 14A by restricting the amount of disallowance to the lower of exempt income or amount arrived at by prescribed formula under rule 8D clause (iii) by taking into only those investments which yielded exempt income. By applying the ratio of the above decisions, we restore the disputed issue to the file of the AO for limited purpose to restrict the disallowance u/s 14A to the extent of exempt income and allow the grounds of appeal are allowed for statistical purposes. 7. Now we shall take up the revenue appeal in ITA No.537/Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X
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