2017 (4) TMI 232

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....-13 wherein the assessee has raised the following grounds of appeal, which are common in both the appeals, except the quantum of disallowance : "1. The order of the hon'ble Commissioner of Income-tax (Appeals) is erroneous in law as well on facts. 2. The hon'ble Commissioner of Income-tax (Appeals) ought to have observed that the Assessing Officer ought not to have disallowed any amount by invoking the provisions of section 14A of the Income-tax Act. 3. The hon'ble Commissioner of Income-tax (Appeals) ought to have observed that the Assessing Officer erred in working out the amount at Rs. 4,06,620 in the assessment year 2009-10 and at Rs. 33,12,740 in the assessment year 2012-13 by invoking rule 8D of ....

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....in respect of the expenditure on exempt income. Such disallowance under section 14A as per rule 8D(iii) i.e. 0.5 per cent. of the average value of investments worked out to Rs. 4,06,620 by the Assessing Officer. 3. Before the Commissioner of Income-tax (Appeals), the assessee filed explanation highlighting the fact that there was no nexus between investment in funds yielding exempted income with any expenditure. It also submitted that the reserves and surpluses and regular income of the business were much more than the investments in such funds. Further it was submitted that the Assessing Officer, while accepting the explanation of the appellant with regard to first two components of computation under the rule, invoked rule 8D(2)(iii) an....

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....r : B = the average of value of investment, income from which does not or shall not form part of the total income, as appearing in the balance-sheet of the assessee, on the first day and the last day of the previous year; C = the average of total assets as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year; In particular, the notes for 'B' clearly states that the average value of investment, income from which does not or shall not form part of the total income. It is clear that we have to include those investments which has generated income and exclude those investments, which have not generated income. In the present case, the Assessing Officer had taken....