2022 (3) TMI 1210

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....hallenged the disallowance under section 14A read with Rule 8D(2)(ii) on account of interest. 3. Facts in brief are that the assessee company is engaged in the business of electronics and computer hardware. Assessee had earned dividend income of Rs. 33,10,110/- which was claimed as exempt. The assessee in the computation of income has worked out suo motu disallowance of Rs. 2,77,600/- which was worked out under Rule 8D(2)(iii) i.e. by taking 0.5% of average value of investments of Rs. 5,55,19,967/- on which dividend was received. However, AO without recording any satisfaction has proceeded to make disallowance of Rs. 2,99,83,789/- and after reducing the amount of Rs. 2,77,600/- had disallowed by the assessee made addition of Rs. 2,97,06,18....

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....of Rs. 5.55,19,967/- on which dividend was received. The list of investments on which dividend received and working of disallowance computed by Assessee is enclosed as Annexure 2 for your kind perusal. Delhi Appellate Tribunal( Special Bench) in the case of ACIT vs. Vireet Investment (P.) Ltd. [2017] 82 taxmann.com 415 (Delhi-Special Bench) has held that only those investments are to be considered for computing average value of investments which yielded exempt income during the year. In other words, the contention of the assessee stands fully APPROVED by the decision of the Special Bench of ITAT Delhi. Therefore, in the light of the decision of the Special Bench of Delhi ITAT, the working of disallowance u/r. 8D(2)(ii)/(iii) is required t....

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....and has mechanically proceeded to apply rule BO, which is not permissible in law as per various judgments 'including the judgment of Apex Court and disallowance made by him is illegal. It is further submitted that assessee's own funds as per the Balance Sheet are much more than the total investments. Thus, According to the assessee no disallowance u/r. 8D(2)(ii) on common interest was called for as the assessee's own funds exceeded the investments which yielded tax free income as under:-   As on 31.03.2016 Rs.Crore     104.70 Shareholders' funds     Total Investments     Shares (Quoted & Unquoted) :  6.08   Mutual Fund (Quoted & Unquoted) : 15.00   Inves....

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....Del/2018 in AY 2014-15 vide order dated 14.10.2020 has deleted the similar disallowance made u/s. 14A on account of interest expenditure under Rule 8D(2)(iii) on the ground that assessee has surplus fund for making the investment. In this year also, he submitted that the assessee had shareholders fund of more than Rs. 104.70 crores and the investment made by the assessee was of Rs. 94.48 crores wherein the investment in partnership was Rs. 73.76 crores, thus on shares and mutual fund, there was only investment of Rs. 21 crores. Thus, no disallowance u/s. 14A can be made on account of interest expenditure in view of the decision of the Tribunal in assessee's own case (supra). 7. Ld. DR for the Revenue however relied upon the order of th....