2022 (8) TMI 856

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.... Officer (AO) under Section 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2010-11. 2. The grounds of appeal raised by the assessee reads as under: "1. The order passed by the Learned CIT(A) ['Ld CIT(A)'], upholding the disallowance of INR 43,00,745/- made by the learned Assessing Officer ('Ld. AO') u/s. 14A of the Income Tax Act, 1961 ('the Act'), is bad in law and on the facts and circumstances of the case. 1.1 The Ld. CIT(A) has erred in upholding the disallowances that have been made by the Ld. AO in a mechanical manner without following direction of the Hon'ble ITAT. 1.2 The Ld. CIT(A) has erred in upholding the disallowances that have been made by the Ld. AO based o....

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....inate Bench in the case of the assessee in ITA No. 437/Del/2019; Assessment Year 2009-10, order dated 30th May, 2022 similar relief should be given and the Assessing Officer may be directed to compute disallowance under Rule 8D(2)(iii) by considering only those investments which have yielded exempt income during the year. In this context, the assessee has furnished the following working to demonstrate the quantum of investment which yielded exempt income during the year. Particular Details Balance as on 31.03.2009 Balance as on 31.03.2010 Average Total Investments (-) Provision for diminution of investments   80,73,67,329 (5,000) 1,13,22,60,956 (5,000)   Net Investments (A) 80,73,62,....

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..... As could be seen from the working furnished by the assessee, the income from some investments are taxable. Therefore, those investments obviously have to be reduced from the average value of investments. As regards the investments, which have not yielded any exempt income during the year, as per ratio laid down in various judicial precedents, they cannot be considered for computing disallowance under Rule 8D(2)(iii). In this context, the following observations of the Hon'ble Delhi High Court in case of Pr. CIT Vs. Caraf Builders & Constructions (P.) Ltd. (supra) would be relevant: "26. There is another error made by the Assessing Officer in computing the disallowance under clauses (ii) of Rule 8D (2) with reference to the for....