2023 (3) TMI 1110

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....rder dated 31/03/2021, passed under section 154 of the Act, for the assessment year 2014-15. 2. The brief facts of the case are: The assessee is engaged in the business of construction and development work. For the year under consideration, the assessee filed its return of income on 30/11/2014, declaring a loss of Rs.66,06,507. The return of income filed by the assessee was processed under section 143(1) of the Act. Thereafter, the return was selected for scrutiny assessment and accordingly statutory notices under sections 143(2) and 142(1) were issued and served on the assessee. The Assessing Officer ("AO") vide order dated 23/08/2016, passed under section 143(3) of the Act assessed the total income of the assessee at a loss of Rs.56,57,8....

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....e the ingredients of the Section 14A are present and the AO is reasonably satisfied, about the applicability of Rule 8D.The Average yearly value of Investments in this case was Rs. 28.55 Crores, which generated/ would generate exempt income and the related interest expenses in the profit and loss account were Rs. 2.90 Crores. Proportionate part of such expenses would have to computed as per Rule 8D and then would have to be added by the AO. 5.4 Therefore, the computation made by the AO under Rule 8D(2)(ii) and (iii), which was incorrectly made in the earlier order, was liable to be corrected under section 154, as it was made incorrectly earlier and was a mistake apparent from the record. Earlier computation of disallowance under Rule 8D, ....

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....allowance under section 14A r/w Rule 8D as under:- "4.4 Thus, having regard to the accounts of the assessee company of the previous year relevant to A.Y. 2014-15, the undersigned is not satisfied with the correctness of the assessee's claim. Accordingly, the amount of expenditure disallowable u/s.14A of the Act in relation to such income is hereby determined in accordance with the provisions of Rule 8D of the Income Tax Rules, 1962 as under:- (i) The amount of expenditure directly relating to income which does not form part bf total income - - - - (ii) Proportionate of interest expenditure computed in accordance with the formula given in Rule 8D(2)(ii) (A X B/C) - - (iii) Amount equal to one-half percent of the average ....

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....d that disallowance under section 14A of the Act would not be warranted where interest-free own funds exceed the investment in tax-free securities and in such a case the investment would be presumed to be made out of assessee's own funds. Therefore, respectfully following the law laid down by the Hon'ble Supreme Court and the Hon'ble jurisdictional High Court in cases cited supra, the AO is directed to delete the disallowance made under section 14A r/w Rule 8D(2)(ii). 6. In the present case, it is undisputed that during the year, the assessee earned exempt income totaling Rs.11,20,109. We find that the Hon'ble jurisdictional High Court in Nirved Traders (P.) Ltd. Vs. Dy. CIT, I.T. Appeal No.149 of 2017, vide judgment dated 23.04.2019, has ....