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TMI Blog2022 (4) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... this appeal is regarding the validity of the disallowance made/confirmed by the lower authorities u/s 14A r.w. Rule 8D(2)(ii) and 8D(2)(iii) of the I.T Rules on account of expenditure incurred for earning of tax exempt income. 3. So far as the disallowance u/s 14A of the Act r.w. Rule 8D(2)(ii) of the I.T. Rules is concerned, the ld. Counsel for the assessee has submitted that the assessee had sufficient owned funds to meet the investments. He, in this respect, has relied upon the balance sheet of the assessee for the year under consideration to submit that the assessee had share capital of Rs. 5.86 crores and reserve and surplus of Rs. 77.91 crores as on 31.03.2013 and these were share capital of Rs. 5.86 crores and reserve and surplus of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an the investments made" The Hon'ble Supreme Court after detailed discussion on the issue has finally answered the aforesaid questions in favour of the assessee and against the Revenue holding that the proportionate disallowance of interest is not warranted under Section 14A of Income Tax Act for investments made in tax free bonds/ securities which yield tax free dividend and interest to Assessee Banks in those situations where, interest free/own funds available with the Assessee, exceeded the investments. Further reliance in this case can also been placed on the decision of the Hon'ble Supreme Court in the case of Hero Cycle (P) Ltd. Vs. CIT 379 ITR 347 (SC) and also the decision of the Hon'ble Supreme Court in the case of CIT (LTU) vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ltd vs. CIT ITA No.117/2015 dated 25.02.2015 and further in the case of ACB India Limited vs. ACIT ITA No. 615/2014 dated 24.3.2015 wherein it has been held that for computing the average value of investment u/s 14A of the Act read with rule 8D(2)(iii), only the investment yielding non-taxable income have to be considered and not the entire investment. In view of this, the Assessing Officer is directed, accordingly, to consider only the investments yielding tax exempt income for computation of disallowance under Rule 8D(2)(iii) of the I.T. Rules. In view of the above discussion, the impugned order of the CIT(A) is set aside.
8. In the result, the appeal of the assessee stands partly allowed.
Kolkata, the 2nd March, 2022. X X X X Extracts X X X X X X X X Extracts X X X X
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