TaxTMI 
TaxTMI 
2016 (9) TMI 1205
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....to assessment year A.Y. 2010-11 and 2011- 12 respectively. 2. The sole and common issue raised in all the appeals is regarding the disallowance under section 14A of the Income Tax Act, 1961 read with rule 8D of the Income Tax Rules, 1962. 3. First we take up the appeal of assessee bearing ITA No.26 and cross appeal of the Revenue bearing ITA No.18/M/2015 relevant to A.Y. 2010-11. ITA No.26 & 18/M/2015 for A.Y. 2010-11 4. The brief facts of the case are that during the assessment proceedings the Assessing Officer (hereinafter referred to as the AO) noted that the assessee for the year under consideration had claimed tax exempt dividend income of Rs. 6,75,076/- and tax exempt long term capital gains of Rs. 19,62,821/-. When asked to expl....
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.... was attracted. Further, a plea was also taken that the assessee during the year had also earned interest income and that for computation of interest expenditure, the netting of the interest income and interest expenditure should be done and net interest expenditure should be taken into consideration. 6. After considering the above submissions of the assessee, the Ld. CIT(A), while relying upon the decision of his predecessor in relation to earlier assessment year i.e. A.Y. 2009-10, held that only those investments income from which was exempt were to be taken for taking the average value of investment for computing disallowance as per rule 8D. He, therefore, directed the AO to exclude the investments, the income from which was not exempt,....
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.... appeal agitating the action of the Ld. CIT(A) in directing the AO to exclude the investments made in foreign companies and to consider the net interest expenditure for the purpose of computation of disallowance under rule 8D(2)(ii). 9. We have considered the rival contentions. The undisputed facts are that most of the investments have been made by the assessee in the group and associate companies which were strategic investments and no dividend income has been received by the assessee on those investments. It is also undisputed that the own funds of the assessee were more than the investments made during the year. The Ld. Counsel for the assessee has brought our attention to page 7 of the impugned order wherein the submissions of the asse....
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....14 of the Act or rule 8D cannot be interpreted so as to mean that the entire tax exempt income of the assessee is to be disallowed. That the window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure incurred by the assessee in relation to the tax exempt income. This proportion or portion of the tax exempt income surely cannot swallow the entire amount of tax exempt income. The Hon'ble Delhi High Court in the case of "Chem Investments vs. CIT" (2015) 61 taxman.com 118 has held that section 14A will not apply if no exempt income is received or receivable during the relevant previous year and that the expression 'does not form part of the total income', in section 14A of the Act envisages that th....