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TMI Blog2024 (2) TMI 691X X X X Extracts X X X X X X X X Extracts X X X X ..... e hold that such disallowance made by the learned assessing officer is not correct. The learned assessing officer is directed to delete the same. While working out disallowance u/s 14A of administrative expenses u/r 8D (2) (iii) made AO could have been made only after taking only those investments which have yielded exempt income during the year - This is also supported by the decision of Cargo motors private limited [ 2022 (10) TMI 571 - DELHI HIGH COURT] wherein it has been held that for the purpose of making disallowance of expenses under section 14A as per rule 8D only those investments were to be considered for computing average value of investments which yielded exempt income during the year. Therefore, both the grounds in the appeal of the assessee are allowed. Disallowance u/s 14A of the act cannot be applied more than exempt income earned during the year for the impugned assessment year. MAT computation u/s 115JB - Disallowance made by AO u/s 14 A by invoking the provisions of rule 8D of the act could also be imputed under the computation of book profit under section 115JB has already been decided in case of Vireet Investments P Ltd [ 2017 (6) TMI 1124 - ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ielded exempt income during the year should be considered for the purpose of disallowance and further when the assessee has own funds which are more than the value of the investment the disallowance of interest under rule 8D (2) (ii) cannot be made. 6) The learned AO is aggrieved by the order of the learned CIT A wherein he has restricted the disallowance under section 14 A to the extent of exempt income as per normal computation of total income and restricting the addition in the computation of book profit under section 115 JB of The Income Tax Act to the extent of Rs. 112,000/-. 7) The fact of the case show that the assessee has earned exempt income during the year of Rs. 24,800,670/ . The assessee on its own offered disallowance u/s 14A of the Act of Rs. 4,368,868/ . The learned assessing officer computed interest disallowance under rule 8D (2) (ii) of the act of Rs. 198,245,193 and further the administrative expenses are disallowed under rule 8D (2) (iii) of Rs. 511,533,421/ and therefore the total disallowance was computed of Rs. 709,778,614/ . 8) Coming to the appeal of the learned assessing officer wherein the learned Departmental representative submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of the investments no disallowance of interest expenditure is called for under rule 8D (2) (ii) of the rules. With respect to the second issue he submitted that the issue is squarely covered in favour of the assessee by the decision of the honourable Delhi High Court in case of cargo motors private limited versus DCIT 145 taxmann.com 641 wherein it has been held that for making disallowance of expenses under section 14 A as per rule 8D only those investments were to be considered for computing average value of investments which yield exempt income during the year. 12) With respect to the argument of the learned departmental representative that the amendment made by The Finance Act 2022 is prospective in nature, it was submitted that the issue is squarely covered in favour of the assessee by the decision of the honourable Delhi High Court in case of Era infrastructure Ltd wherein it has been held that such amendment is applicable prospectively. Therefore, the argument of the learned departmental representative that even if there is no exempt income, the disallowance under section 14 A required to be made is not correct for at least this year. 13) We have carefully co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the assessee s appeal is that while working out disallowance under section 14 A of administrative expenses under rule 8D (2) (iii) of the act made by the learned assessing officer of Rs. 511,533,421/ could have been made only after taking only those investments which have yielded exempt income during the year. This is also supported by the decision of the honourable High Court in cargo motors private limited versus deputy Commissioner of income tax (145 taxmann.com 641) wherein it has been held that for the purpose of making disallowance of expenses under section 14 A as per rule 8D only those investments were to be considered for computing average value of investments which yielded exempt income during the year. Therefore, both the grounds in the appeal of the assessee are allowed. 14) With respect to the grounds of appeal of the assessing officer challenging that the CIT A has wrongly restricted the disallowance under section 14 A to the extent of exempt income, is also covered against the learned assessing officer by the decision of coordinate bench in assessee s own case for assessment year 2014 15 in ITA number 1952/M/2023 and cross objection number 70/M/2023 dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted the disallowance holding that in absence of any exempt income disallowance was impermissible. Accordingly, he deleted the disallowance under section 14 A read with rule 8D in the normal computation of total income as well as computation of book profit under section 115JB of the act. All other contentions raised by the assessee were not dealt with by the learned CIT A. Therefore, aggrieved with the order of the learned CIT A both the parties are in appeal before us. 20) In the appeal of the assessing officer the only contention is that even if there is no exempt income, the disallowance under section 14 A is required to be made placing reliance on the circular number 5 2014 as well and the amendment to the act subsequently. 21) Assessee is also aggrieved that the learned CIT A has not made with its alternative contentions stating that only the investments which have yielded the exempt income during the year are required to be considered for working out disallowance under rule 8D (2) (iii) and further no disallowance of interest can be made under rule 8D (2) (ii)of the act also on the investments which have not yielded exempt income during the year. 22) We h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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