2015 (10) TMI 2709

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....preciating that, in fact the interest expenses debited by the assessee in its P&L A/c cannot be directly linked with the interest income. 2. On the facts and in the circumstances of the case and in law. the Ld. CIT(A) erred in directing the Assessing Officer to consider net interest for the purpose of computing interest expenditure u/s. 14A r.w.r 8D, without appreciating that, there is no provision in the Act, that the interest expenses should not be adjusted with interest income while considering the disallowance of interest expenses u/s 14A of the IT Act, 1961. 3. For these and other grounds that may be urged at the time of hearing. the decision of the CTT(A) may be set aside and that of the AO be restored." Brief facts: 2.Ass....

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....current assets instead of total assets as stipulated in clause 2 of Rule 8D while calculating disallowance, that not disallowance was to be made in the light of the decision of Godrej Boyce Mfg. Ltd. (supra).The assessee referred to the cases of Chem Invests Ltd. and Keshav Sales and Stocks Ltd. After considering the submission of the assessee and assessment order,the FAA held that the assessee had made average investment of Rs. 1.25 crores,that expenditure claimed by it for earning exempt income could be considered for disallowance, that it could not establish the nexus between the entire capital being invested in securities,that it was possible that some part of it would have gone to investment in shares also, that the assessee itself ....

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.... three components.The first component is the amount of expenditure directly relating to income which does not form part of the total income. The second is being computed on the basis of the formula given therein in a case where the assessee incurs expenditure by way of interest which is not directly attributable to any particular income or receipt. The formula essentially apportions the amount of expenditure by way of interest (other than the amount of interest included in clause (i)) incurred during the previous year in the ratio of the average value of investment, income from which does not or shall not form part of the total income, to the average of the total assets of the assessee. The third component is an artificial figure-one half p....