TaxTMI 
TaxTMI 
2017 (11) TMI 1784
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.... Ld. CIT(A) has erred in not considering the fact that the amount of disallowance u/s 14A has to be computed as per rule 8D(iii) to the amount of Rs. 23,87,81,792/- over and above the suo motto disallowance of Rs. 8,57,73,798/- made by the assessee on the basis of the CBDT Circular No. 5 of 2014 dated 11.02.2014, which clearly states that it is not necessary to earn exempt income in that particular year in which the disallowance is made." 2. "Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) has erred in directing the AO to adopt the disallowance to Rs. 40,00,000/- u/s 115JB for working out book profit as per clause (f) of Explanation to section 115JB instead of Rs. 30,96,65,651/ as adopted by the AO ....
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....on. Therefore, the Assessing Officer asked the assessee to furnish details regarding the working of expenditure incurred for earning exempt income as per the provisions of section 14A r.w. Rule 8D and also to submit fund flow statements to prove that the investments were made out of their own funds and not out of borrowed funds. The assessee filed submissions but the Assessing Officer found it to be not satisfactory. The Assessing Officer worked out the disallowance as per the formula laid down in Rule 8D and based on the total investments yielding exempt to Rs. 32,45,55,590/-. Thus, the Assessing Officer made disallowance of Rs. 32,45,55,590/- u/s. 14A r.w. Rule 8(D)(2)(iii) of expenses other than interest and since the assessee had suo mo....
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....8D and this computation of disallowance was used as a base to the disallowance u/s. 115JB also by calculating the expenditure on a basis i.e., the ratio of incomes granted exemption u/s. 115JB and in normal computation. Thus, the Assessing Officer worked out the disallowance by taking disallowance u/s. 14A read with Rule 8D as the base and made further disallowance of Rs. 30,96,65,651/- while computing the book profit u/s. 115JB. 6. Against the above order, the assessee appealed before the ld. CIT(A). 7. As regards the disallowance u/s. 14A in the normal computation of income, the ld. CIT(A) followed his order for assessment year 2011-12 and held as under: 5.1.4 The same issue had been decided by me in the appellant's cas....
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....ed during the year. The Assessing Officer is directed to do so. These grounds of appeal are allowed. 8. As regards the disallowance u/s. 115JB in consequence to disallowance u/s. 14A, the ld. CIT(A) found that the Assessing Officer has worked out the disallowance at Rs. 30,96,65,651/-. He referred to earlier decision for the proposition that Rule 8D u/s. 14A cannot be applied for computing profit u/s. 115JB, the ld. CIT(A) directed the Assessing Officer to estimate the expenses directly relatable to exempt income at Rs. 40 lacs, instead of the addition made by the Assessing Officer based upon Rule 8D of section 14A. 9. Against the above order, the Revenue is in appeal before us. 10. The ld. Departmental Representative relied upon t....
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....while computing profit u/s. 115JB. 14. In the preset case, we find that the assessee has already made disallowance of Rs. 15,61,02,809/- towards interest being expenditure relating to exempt income. The Assessing Officer proceeded to apply the provisions of Rule 8D u/s. 14A and accordingly based upon these calculation made further disallowance of Rs. 30,96,65,651/-. 15. Upon the assessee's appeal, the ld. CIT(A) increased the disallowance in this regard by Rs. 40 lacs. In this regard, the ld. Counsel of the assessee has submitted before us that no disallowance u/s. 14A read with Rule 8D has to be done while computing book profit u/s. 115JB. We find that this proposition draw support from the Special Bench decision in the case of V....