2022 (6) TMI 289

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....the AO u/s. 14A r.w. Rule 8D in the facts and circumstances of the case. 3. Heard both the parties and perused the material available on record. We note that the assessee is a company engaged in the business of manufacturing of automotive components like Head Lamps, Tail Lamps, Blinkers, Chassis, Petrol Tank etc. The assessee declared total income of Rs.42,33,20,430/- and the AO determined the same at Rs.42,41,31,850/- inter alia making addition u/s. 14A of the Act. The CIT(A) confirmed the addition made by the AO. 4. The ld. AR submits that the assessee derived exempt income of Rs.18,37,500/- and on its own disallowed Rs.91,875/- being 5% of the exempt income. The AO by applying the method under Rule 8D(2)(iii) made further disallowance ....

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....page no.3 of the Paper Book filed before us, it is clear that no borrowings were utilized for the purpose of making the investments which yielded the dividend income. The borrowings shown in the books of account were made for specific purpose. In the absence of evidence to the contrary, it cannot be presumed that the borrowed funds have been utilized for the purpose of making the investments which yielded the dividend income. Therefore, we are of the considered opinion that no further disallowance u/s 14A of the Act is warranted. Accordingly, we direct the Assessing Officer to delete the addition of Rs.11,34,302/- made u/s 14A of the Act." 5. On perusal of the above finding concerning A.Y. 2012-13, we note that the AO made disallowance und....

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....is correct to that extent that there were no investments made in the year under consideration and the exempt income earned from the investments made in the earlier years. As discussed above from the financials for A.Y. 2011- 12 the assessee made investments to an extent of Rs.24,29,77,826/- which were shown as non-current investments for A.Y. 2012-13. Admittedly, the disallowance made by the AO in the year under consideration is only under Rule 8D(2)(iii) but not only Rule 8D(2)(ii). Therefore, the finding of Tribunal in assessee's own case for A.Y. 2012-13 is not applicable to the year under consideration for the reason that the Co-ordinate Bench of Tribunal deleted the disallowance made under Rule 8D(2)(ii) by assuming that the investment....