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TMI Blog2024 (8) TMI 690X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of computing average value of investments and accordingly recompute the disallowance under Rule 8D(2)(iii). Addition of disallowance computed u/s. 14A for computing book profits u/s. 115JB - As held in the case of ACIT vs. Vireet Investment (P.) Ltd.[ 2017 (6) TMI 1124 - ITAT DELHI] that the addition to be made under clause (f) of explanation (1) to section 115JB(2) of the Act is required to be made without resorting to computation contemplated u/s.14A r.w. Rule 8D of the Rules. Accordingly, we set aside the order passed by the tax authorities on this issue and restore the same to the file of the AO with a direction to compute the addition to be made under clause (f) of explanation (1) to section 115JB(2) of the Act on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs respectively. The AO noticed that the assessee has held huge non-current investments and also claimed interest expenses. Accordingly, the AO took the view that the disallowance made by the assessee is not in accordance with section 14A r.w. Rule 8D of the Income Tax Rules, 1962 ( the Rules ). Accordingly, he rejected the claim of the assessee and proceeded to compute the disallowance u/s. 14A r.w. Rule 8D of the Rules. The same was confirmed by the Ld.CIT(A) in all the assessment years and hence, the assessee has filed these appeals. 3. In all the four assessment years, the assessee has taken a legal ground contending that the AO has not recorded his dissatisfaction over the workings made by the assessee, having regard to the accounts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn funds available with the assessee was Rs. 100.82 crores while the investments made by the assessee was Rs. 46.56 crores. Accordingly, by placing reliance on the decision rendered by the Hon ble Bombay High Court in the case of HDFC Bank Ltd., [2014] 366 ITR 505 (Bombay), the Ld.AR contended that the disallowance of interest expenditure is not called for. 4.1. With regard to the expenditure disallowance made under Rule 8D(2)(iii), the Ld.AR submitted that the AO should have considered only those investments which have yielded exempt income for the purpose of computing average value of the investments and should have computed the disallowance u/r 8D(2)(iii) accordingly. In support of this proposition, the Ld.AR placed reliance on the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 115JB(2) of the Act on the basis of annual accounts of the assessee without having regard to the disallowance made u/s 14A of the Act. 5. We shall now take up the appeal filed for the AY. 2016-17. In this assessment year, the assessee did not make any disallowance u/s. 14A of the Act. On the contrary, the AO disallowed a sum of Rs. 5,62,26,605/- under Rule 8D(2)(iii) of the I T Rules. 5.1. In this year, the AO has made disallowance of expenditure only under Rule 8D(2)(iii).The Ld.AR submitted that the AO should have considered only those investments which have yielded exempt income for the purpose of computing average value of the investments and should have computed the disallowance u/r 8D(2)(iii) accordingly. In support of this propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance made u/s 14A of the Act. 6. We shall now take up the appeal filed for the AY. 2017-18. In this assessment year, the assessee earned exempt income of Rs. 1,16,837/-. The assessee computed disallowance u/s. 14A of the Act at Rs. 10 lakhs. However, the AO computed disallowance under Rule 8D and accordingly added a sum of Rs. 10,40,43,577/-. 6.1. The Ld A.R submitted that the disallowance u/s 14A should not exceed the amount of exempt income. In support of his arguments, the Ld.AR placed reliance on the decision rendered by the Hon ble Delhi High Courtin the case of Joint Investments Ltd (ITA No.117/2015 dt. 25-02-2015). In this year, the assessee has voluntarily disallowed Rs. 10.00 lakhs u/s 14A of the Act. Further, the above said su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that the AO should have considered only those investments which have yielded exempt income for the purpose of computing average value of the investments and should have computed the disallowance u/r 8D(2)(iii) accordingly. In support of this proposition, the Ld.AR placed reliance on the decision rendered by the Hon ble Delhi High Courtin the case of Cargo Motors Pvt. Ltd., (ITA No.7/2020; dt. 07-10-2022) and also the decision rendered by the Special Bench of the Delhi Tribunal in the case of ACIT vs. Vireet Investment (P.) Ltd., [2017] 82 taxmann.com 415 (Delhi, ITAT) / 165 ITD 27. 7.2. We find merit in the above said submissions of the assessee. In respect of expenditure disallowance to be made u/r 8D of I T Rules, we direct the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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