2025 (10) TMI 854

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....["the Act"] arising out of assessment order dated NIL passed u/s 143(3) of the Act pertaining to assessment year 2014-15. 2. Brief facts of the case are that the assessee is a company and filed its return of income on 29.11.2014, declaring total income of INR 23,42,970/-. The AO observed that the assessee has shown investment of INR 4,22,31,65,822/- in the equity shares in the Balance Sheet and a sum of INR 3,40,01,144/- being expenditure relatable to such income was suo motto disallowed. AO invoked the provisions of section 14A r.w. Rule 8D of the Income Tax Rules, 1962 ("the Rules"), has computed the total amount of disallowance of INR 11,67,38,556/- and made the addition/disallowance of INR 8,27,37,362/- being the difference between t....

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....red by the AO and CIT(A). No more disallowance is called for on the facts of the case. 5. That the calculations made by the AO to compute disallowance of Rs. 8,27,37,362/- over and above the amount of Rs. 3,40,01,194/-suo-moto disallowed by the assessee is illegal, bad in law, and against various judgements of Income Tax Appellate Tribunal, High Court and Supreme Court. 6. That the AO and CIT(A) have erred in ignoring the fact that the majority of the dividend income earned by the assessee is from the strategic investments made in the group concerns and hence no disallowance is justified u/s 14A. 7. Without prejudice, the AO and CIT(A) have erred in not appreciating the fact that the assessee has earned exempt inc....

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....ves leave to add, amend, alter and or modify the grounds of appeal of the said appeal." 4. Before us, Ld.AR for the assessee submits that the assessee has already suo motto disallowed the amount of expenditure directly relatable to such investments. He further submits that AO has computed the amount of disallowance in terms of Rule 8D at INR 11,67,38,556/- by ignoring the fact that he has not followed the procedure as prescribed u/s 14A of the Act wherein AO has not recorded the satisfaction about the correctness of the claim of the expenditure relatable to earning of such income. He further submits that the investments on which no exempt income was earned should be excluded from the value of investment considered for computing the disal....

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....rprises Pvt.Ltd.in ITA No.1512/2014 dated 28.02.2017 wherein the Hon'ble High Court has held that prior to amendment w.e.f. 02.06.2016, net interest for the purpose of clause (2) of sub-Rule (2) of Rule 8D would be considered i.e. interest paid by the assessee on borrowings minus interest earned. Thus, by respectfully following the judgements of Hon'ble Gujarat High Court and Hon'ble Bombay High Court, we direct the AO to consider the net interest for the purpose of computing the disallowance u/s 14A r.w. Rule 8D by reducing the amount of interest received from total interest paid on the borrowings. 7. Further, for the purpose of average value of investment it was contended that those investments which had earned exempt income should onl....