TaxTMI 
TaxTMI 
2020 (12) TMI 262
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.... the application is allowed. ITA 136/2020 3. The instant appeal under Section 260A of the Income Tax Act, 1961 ("the Act") is directed against the common order dated 12.06.2019 passed by the Income Tax Appellate Tribunal ("ITAT"), whereby the learned ITAT has decided the issues, urged in the present appeal, in favour of the Respondent-Assessee. In Appeal No. 2368/Del/2016, preferred by the Respondent-Assessee, the learned ITAT has accepted Respondent-Assessee's contention with respect to the addition pertaining to the prior period income; and in Appeal No. 3299/Del/2016, filed by the Appellant-Revenue, the learned ITAT has restricted the disallowance, under Section 14A read with Rule 8D (2) (iii), in respect of expenditure incurred in....
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....ts and in the circumstances of the case and in law, the Ld. ITAT is justified in restricting the disallowance to only 0.5% of average investment income of Rs. 1,33,74,000/- in terms of section 14A r. w. Rule 8D(2)(iii) as against Rs. 9,69,57,875/- disallowed u/s∙ 14A r. w. Rule 8D(2)(ii) and (iii) ? b) Whether on the facts and in the circumstances of the case and in law, the Ld. ITAT has erred in deleting the addition of Rs. 3,36,80,000/- made by the assessment officer on account of prior period income? c) Whether the order passed by ITAT is bad in law and on facts?" 6. Mr. Sharma argues that the learned ITAT was not justified in restricting the disallowance in terms of Section 14A/w Rule 8D(2)(iii) only to the ex....
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.... the learned ITAT has erred in deleting the addition of Rs. 3,36,80,000/- made by the AO on account of prior period income. The direction of the learned ITAT to net off prior period income and expenditure, and to tax only the net income is erroneous as it results in allowance of Rs. 1.80 Crores to the Respondent-Assessee without verification by the AO as to whether such expenses had actually crystallized or not. 7. We have duly considered and reflected upon the submissions advanced by Mr. Sharma. The records reveal that the AO made disallowance under Section 14A read with Rule 8D amounting to Rs. 9,69,57,875/- and made addition accordingly. In appeal before the CIT (A) it was restricted to 0.5% of the average investment income of Rs. 1,3....
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....allowance of interest under rule 14 A r. w. rule 8D (2)(ii) of Rs. 71.853 million INR is deleted. However, as regards the disallowance under rule 8D(2)(iii), being 0.5% of the average investments (income from which is exempt), the undersigned does not agree with the order of my predecessor that no administrative expenses were incurred in connection with such investments. In a large organisation like appellant, the investments needs to be regularly monitored and man hours of staff are used apart from other administrative expenses. Therefore, the appellant's claim that no such expenditure was incurred is not correct. Once it is held that the claim of the appellant is not correct, the only way to estimate the same, is under rule 8D (2)(iii....
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....ance under Rule 8D(2)(iii), it was observed that Respondent-Assessee's claim that no expenditure was incurred is not correct. In these circumstances, expenditure was to be estimated under Rule 8D(2)(iii) being 0.5% of the average investment income which is exempt. It was noticed that value of average investment had been calculated as the average of total investments, mentioned in Schedule F. However, the CIT (A) noted that since all the investments mentioned in Schedule F do not yield exempt income, disallowance under Section 14A read with Rule 8D(2)(iii) has been restricted only to 0.5% of the average investment income which is exempt, irrespective of whether such exempt income was received during AY 2011-12. This approach has been upheld ....