Appeal partly allowed, directing deletion of disallowance under section 14A & restricting disallowance to exempt income.

The Tribunal partly allowed the appeal, directing the Assessing Officer to delete the disallowance made under section 14A r/w Rule 8D(2)(ii) and restrict the disallowance under section 14A r/w Rule 8D(2)(iii) to the exempt income earned. The challenges regarding the jurisdiction under section 154 of the Income Tax Act were dismissed as the AO's order was deemed a correction of a mistake apparent from the record and legally valid.

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Issues involved:
The appeal challenging the order passed under section 250 of the Income Tax Act, 1961 by the Commissioner of Income Tax (Appeals) for the assessment year 2014-15.

Jurisdiction under section 154 of the Act:
The Assessing Officer (AO) assessed the total income of the assessee at a loss under normal provisions of the Act, after making a disallowance under section 14A r/w Rule 8D. The AO later passed a rectification order under section 154 of the Act, recalculating the disallowance under section 14A. The Commissioner of Income Tax (Appeals) upheld the exercise of jurisdiction by the AO under section 154 and the computation of disallowance under section 14A r/w Rule 8D. The AO's order was considered a correction of a mistake apparent from the record and was legally tenable.

Disallowance under section 14A r/w Rule 8D:
The AO computed the disallowance under section 14A r/w Rule 8D based on the exempt income earned by the assessee during the year. The AO considered interest expenses debited in the profit and loss account while making the disallowance. However, the Tribunal directed the AO to delete the disallowance made under section 14A r/w Rule 8D(2)(ii) as the investment in tax-free securities was presumed to be made out of the assessee's own funds. The Tribunal also restricted the disallowance made under section 14A r/w Rule 8D(2)(iii) to the exempt income earned by the assessee. The appeal challenging the disallowance under section 14A r/w Rule 8D was partly allowed.

Conclusion:
The Tribunal partly allowed the appeal by the assessee, directing the AO to delete the disallowance made under section 14A r/w Rule 8D(2)(ii) and restrict the disallowance under section 14A r/w Rule 8D(2)(iii) to the exempt income earned by the assessee. The issues challenging the assumption of jurisdiction under section 154 of the Act were dismissed as the AO's order was considered a correction of a mistake apparent from the record.

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