2025 (6) TMI 718

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....Y. for short) 2017- 18. 2. The grounds raised by the Revenue are as under: "1. Whether on the facts and circumstances and in law the ld. CIT(A) was justified in not considering that as per the amended provisions of the Finance Act, 2022, section 14A shall apply to a case irrespective of whether exempt income has accrued or received during the previous year relevant to an assessment year and expenditure has been incurred during the said previous year in relation to such exempt income?" 2. Whether on the facts and circumstances and in law the ld. CIT(A) was justified in not considering that amended provisions of the Finance Act, 2022 has nullified several judgements as relied by the assessee wherein it was held that no di....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ee has disallowed an amount of Rs. 10,55,162/- u/s. 14A, being expenditure attributable to earning of exempt income. Being of the view that the suo motu disallowance made by the assessee is not in accordance with section 14A read with Rule 8D, the A.O. proceeded to compute the disallowance by applying the methodology provided under Rule 8D. While doing so, he disallowed an amount of Rs. 2,46,08,240/- under Rule 8D(2)(ii). The assessee having made suo motu disallowance of Rs. 10,55,162/-, the A.O. made a net disallowance of Rs. 2,35,53,078/-. The disallowance so made was contested by the assessee before the first appellate authority inter alia on the ground that while rejecting the suo motu disallowance made by the assessee, the A.O. has not....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....submissions and perused the materials on record. The crux of the issue is, what should be the average value of investment for computing disallowance of indirect (administrative) expenses under Rule 8D(2). Now, it is fairly well settled through a catena of judicial precedents that while computing disallowance under Rule 8D(2) based on average value of investment, only those investments can be considered, which have yielded exempt income during the year under consideration. In other words, the investments which have not yielded any exempt income during the year, cannot form part of average value of investment. Undisputedly, the first appellate authority, while deleting major part of the disallowance has followed the settled legal position. In....