TaxTMI 
TaxTMI 
2021 (3) TMI 653
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....ed 30.12.2016 for A.Y. 2014-15. We shall first take up the appeal of the assessee. The assessee has assailed the impugned order on the following grounds of appeal before us: "A. DISALLOWANCE U/S. 14A OF THE ACT R.W. RULE 8D(2)(iii) OF THE INCOME-TAX RULES. 1962 ("the Rules"): 1. On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) - 22, Mumbai ("the CIT(A)") erred in confirming the action of the Deputy Commissioner of Income Tax -14(3)(1), Mumbai ("Assessing Officer") in disallowing expenses u/s. 14A of the Act r.w. Rule 8D(2)(iii) of the Rules to the extent of Rs. 1,88,58,934/-. The Appellant submits that the above disallowance is wrongly made under the fa....
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....heir representative may deem fit." 2. Briefly stated, the assessee company which is engaged in the business of generation of electricity had filed its return of income for A.Y. 2014-15 on 28.11.2014, declaring a total income of Rs.nil. The return of income was initially processed as such under Sec. 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act. 3. During the course of the assessment proceedings it was observed by the A.O that the assessee during the year in question had earned dividend income of Rs. 1,88,58,934/- from investments made in exempt income yielding shares. However, it was noticed by the A.O that the disallowance offered by the assessee under Sec.....
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....r Sec. 14A r.w Rule 8D was to be made only in respect of the investments which had yielded exempt income during the year in question; and (b) that considering the availability of self owned funds with the assessee no disallowance of any part of the interest expenditure was called for under Sec.14A r.w Rule 8D(2)(ii). However, after observing as hereinabove, the CIT(A) directed the A.O to restrict the disallowance under Sec. 14A to the extent of the exempt income earned by the assessee during the year in question. Accordingly, on the basis of his aforesaid deliberations the CIT(A) partly allowed the assessee's appeal. 5. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. It was submitted ....
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....yielded exempt income during the year in question were to be considered. At the same time, we find that the CIT(A) had also found favour with the claim of the assessee that the disallowance under Sec. 14A was liable to be restricted only to the extent of the exempt income that was received by the assessee during the year in question. Controversy in hand had arisen pursuant to the direction of the first appellate authority that the disallowance under Sec. 14A r.w Rule 8D be restricted to the extent of the exempt dividend income of Rs. 1,88,58,934/- that was earned by the assessee during the year in question. 8. We have given a thoughtful consideration to the issue before us and find substantial force in the claim of the ld. A.R that the f....
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....d statutory provision was liable to be restricted only to the extent the same was computed under Sec. 14A r.w Rule 8D(2)(iii). In our considered view, the intent of the first appellate authority to restrict the disallowance under Sec.14A to the extent the same is worked out u/rule 8D(2)(iii), subject to an upper limit i.e the amount of the exempt dividend income that was earned by the assessee during the year in question can safely be gathered from a conjoint perusal of his observations recorded in the appellate order. Be that as it may, in order to dispel any doubts, we herein direct the A.O to restrict the disallowance under Sec. 14A r.w Rule 8D to the extent the same is worked out u/rule 8D(2)(iii) i.e after excluding the investments tha....
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....ethod of determination as per Rule 8D of the Income Tax Rules, 1962. 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the amount of expenditure relatable to the exempt income and computed under sec. 14A r.w.r 8D is not required to be added to the book profit, which is contrary to the plain and literal meaning of language employed in clause (f) of Explanation 1 to Section 115JB of the IT Act. 5. The appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of appeal. 6. The appellant prays that the order of CIT(A) on the above ground be set-aside and that of the Assessin....