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TMI Blog2019 (12) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... oup companies stating those being strategic in nature are dismissed. In respect of the other grounds of appeal, we are of the considered view that the ratio laid down in Vireet Investment (P.) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] that only those investments are to be considered for computing average value of investment which yielded exempt income during the year has relevance in the instant case. Disallowance u/s 14A r.w. Rule 8D cannot exceed the exempt income earned by the assessee during the year under consideration as laid down in HSBC Investment Direct (India) Ltd. [ 2019 (2) TMI 731 - BOMBAY HIGH COURT] , M/s Empire Package Pvt. Ltd. [ 2016 (2) TMI 505 - PUNJAB AND HARYANA HIGH COURT] . X X X X Extracts X X X X X X X X Extracts X X X X ..... ordance with Rule 8D to Section 14A, without first establishing that such expenditure was indeed incurred for earning exempt dividend income. c the Appellant has not incurred any expenditure which was attributable towards earning of tax free dividend income and such disallowance cannot be made on the basis of presumptions and by applying rules mechanically; d expenditure incurred refers to actual expenditure, if no expenditure is incurred in relation to exempt income, no disallowance can be made. e the Appellant has made substantial investments in its own Group companies in the past which are Strategic in nature and which does not require day-today monitoring; f application of formula as per Rule 8D totally inequitable and this d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in respect of disallowance made u/s 14A r.w. Rule 8D. In response to it, the assessee filed a reply dated 01.01.2016. However, the AO was not convinced with the said reply of the assessee and made a disallowance of ₹ 1,43,68,345/- u/s 14A r.w. Rule 8D after giving detailed reasons at para 5 to 7 of the assessment order dated 31.03.2016. Therefore, we do not find merit in the 2nd ground of appeal of the assessee that the AO, disregarding the accounts of the assessee and ignoring the detailed submissions made regarding the correctness of the assessee's claim has made the assessment. 5. In appeal, the Ld. CIT(A) dealt with the disallowance of interest expenses of ₹ 46,17,095/- under Rule 8D(2)(ii) and deleted the proportionate d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions and perused the relevant materials on record. The reasons for our decisions are given below. In Maxopp Investment Ltd. (supra), the Hon'ble Supreme Court held : "35. The Delhi High Court, therefore, correctly observed that prior to introduction of Section 14A of the Act, the law was that when an assessee had a composite and indivisible business which had elements of both taxable and non-taxable income, the entire expenditure in respect of said business was deductible and, in such a case, the principle of apportionment of the expenditure relating to the non-taxable income did not apply. The principle of apportionment was made available only where the business was divisible. It is to find a cure to the aforesaid problem that the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing average value of investment which yielded exempt income during the year has relevance in the instant case. Also we are of the considered view that the disallowance u/s 14A r.w. Rule 8D cannot exceed the exempt income earned by the assessee during the year under consideration as laid down in HSBC Investment Direct (India) Ltd. (supra), M/s Empire Package Pvt. Ltd. (supra). Consequently, we set aside the order of the Ld. CIT(A) on issues excepting the ground of appeal No.2, 3 & 4(e) and restore the matter to the file of the AO to make an order afresh in the light of the ratio laid down in the decisions mentioned hereinabove and after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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