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TMI Blog2021 (5) TMI 380X X X X Extracts X X X X X X X X Extracts X X X X ..... bove, where assessee has sufficient interest free funds exceeding tax free investments, it is presumed that investments are made out of such interest free funds and therefore no disallowance u/s. 14A r.w.r 8D(2)(ii) of the Rules is called for; 4. Without prejudice to above, while computing average investments for the purpose of Rule 8D of the Rules, only those investment from which exempt income has been earned during the year should be considered; 5. Without prejudice to above, while computing average investments for the purpose of Rule 8D of the Rules, investments which are strategic in nature are to be excluded. 6. Without prejudice to above, for the purpose of calculation of disallowance as per Rule 8D of the Rules, it is only the net interest debited to Profit and Loss Account which should be considered and not the gross interest as considered by the AO; 7. Without prejudice to above, total expenses which can be indirectly be attributable to earning income which does not form part of total income, should be restricted to amount which have been actually debited to P&L account and claimed in the return of income. 3. ITA No. 6654/Mum/2017- Revenue's appeal for A.Y. 2013- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact that the issue has not reached judicial finality." 5. "For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO be restored." 5. The assessee has raised additional ground of appeal which read as under :- "ADDITIONAL GROUND NO. I: ADDITION OF Rs. 91,55,480/- MADE UNDER SECTION 14A READ WITH RULE 8D CANNOT BE MADE WHILE COMPUTING BOOK PROFITS UNDER SECTION 115JB OF THE ACT. On the facts and the circumstances of the case and in law, the Hon'ble CIT(A) erred in confirming that the disallowance made u/s. 14A read with Rule 8D of Rs. 91,55,480/- also ought to be added to the book profit under section 115JB of the Act." 6. Assessment year 12-13 During the year assessee company has earned exempt dividend income of Rs. 2,16,75,690/-. The Assessing Officer made disallowance under section 14 A of the I.T. Act amounting to Rs. 91,55,480/-. 7. Upon assessee's appeal learned CIT(A) confirmed the same observing as under:- "I have considered the findings of the Assessing Officer as well as rival submission of the appellant, carefully. It is seen from the profit & loss account that the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 2,16,75,690/-, it means there is no strategic investment but entire investment has been made for business purpose or for earning dividend that is why as compared to interest income, dividend is on higher side. Therefore, the Appellant's case is suitable case where Rule 8D of the Income-tax Rule, 1962 is to be applied. The Ld. Assessing Officer has rightly refuted the contention of the Appellant that there is a strategic investment and Sec.14A does not apply. Therefore, I find no infirmity in the finding of the Ld. Assessing Officer. Considering the facts of the case, nature of business, nature of investment and applicability of Rule 8D, I find that Rule 8D has rightly calculated the disallowable expense as provided in Rule 8D and therefore, has rightly disallowed an amount of Rs. 91,55,480/- under Rule 8D. Thus, disallowance of expenditure is sustained." 8. Against this order assessee is in appeal before us. We have heard both the parties and perused the records. 9. We find that the assessee's plea of investment being strategic in nature is no more sustainable in view of honourable Supreme Court decision in the case of Maxopp Investment Ltd v/s CIT 402 ITR 640. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidend during the year. The AO is accordingly directed to verify such investment of the assessee and if there is no exempt income earned during the year from such investment, then as per the jurisprudence prevailing on the issue, the AO is directed to exclude the value of such investments for the purposes of computation of disallowance u/s.14A r.w.r.SD. Accordingly, these grounds of appeal are treated as partly allowed subject to computation of disallowance by the AO as directed hereinabove. I have carefully considered the facts of the case as well as oral contentions and written submission of the assessee. The issue on hand has been decided by the Hon'ble Special Bench, New Delhi in the case of ACIT.Circle-17(1), New Delhi v. Vireet Investment (P.) Ltd. (ITA No.502 of 2012) wherein it has been held that the computation under clause (f) of Explanation to section 115JB(2) is to be made without resorting to the computation as contemplated under section 14A read with Rule 8D of the Income-tax Rules, 1962. Respectfully following the same, the ground of appeal raised by the appellant is allowed." 15. Against the above order revenue is in appeal before us. 16. We have heard both ..... X X X X Extracts X X X X X X X X Extracts X X X X
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