Section 14A computation must track dividend-bearing investments and dividend income, while section 115JB requires book figures to be verified.

Disallowance under section 14A read with Rule 8D(2) must be computed on the correct factual basis, using dividend-bearing investments for the administrative expenditure limb and not exceeding the dividend income; the amount originally adopted was therefore directed to be recomputed, giving partial relief. For computation of book profits under section 115JB, the reduction for unabsorbed depreciation had to be verified from the books and the relevant loss schedule because the figures differed; that issue was remanded for factual verification and fresh recalculation.

---

---

Issues: (i) Whether the disallowance under section 14A read with Rule 8D(2) was ly computed and sustained under the normal provisions. (ii) Whether the reduction of unabsorbed depreciation loss while computing book profits under section 115JB was correctly made or required factual verification.

Issue (i): Whether the disallowance under section 14A read with Rule 8D(2) was ly computed and sustained under the normal provisions.

Analysis: The disallowance was worked out by applying the third limb of Rule 8D(2), but the assessment order mistakenly disallowed a higher amount than the computation yielded. The investment base for administrative expenditure was also required to be restricted to dividend-bearing investments, and the disallowance could not exceed the dividend income. The disallowance was therefore required to be recomputed on the correct factual basis.

Conclusion: The disallowance under section 14A was not sustainable in the amount originally adopted and was directed to be recomputed, resulting in partial relief to the assessee.

Issue (ii): Whether the reduction of unabsorbed depreciation loss while computing book profits under section 115JB was correctly made or required factual verification.

Analysis: The dispute turned on the correct figure of unabsorbed depreciation loss as per the books. The figure adopted by the assessee and the figure taken by the assessing authority differed, and the correctness of the amount had to be verified from the books and the relevant loss schedule. As the factual basis was not finally established, the matter required restoration for verification and recalculation.

Conclusion: The issue was remanded for factual verification and fresh determination of the amount to be reduced while computing book profits under section 115JB.

Final Conclusion: The assessee obtained partial relief on the disallowance under section 14A, while the issue relating to computation of book profits under section 115JB was sent back for verification and recomputation.

Ratio Decidendi: Disallowance under section 14A must be confined to the correct Rule 8D computation with reference to dividend-bearing investments and cannot exceed the dividend income, while computation under section 115JB requires the correct book-figure of unabsorbed depreciation to be verified from the accounts before reduction.

---