2023 (7) TMI 1633

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....for the assessment year 2016- 17 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter the 'Act') vide order dated 18.12.2018. 2. The only issue in this appeal of assessee is as regards to the order of CIT (A) confirming the action of AO in making disallowance of expenses relatable to exempt income by invoking the provisions of section 14A of the Act read with Rule 8D of the Rules amounting to Rs. 70,40,476/-. For this, assessee has raised the various grounds but only challenge is the disallowance under clause (ii) of Rule 8D(2) at Rs. 43,23,188/- and under clause (iii) of Rule 8D(2) at Rs. 38,86,943/-. 3. We have heard rival contentions and gone through facts and circumstances of the case. We noted that the AO noticed f....

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.... supra and also the other expenses i.e., 0.5% of average value of investment, the correct computation should be made. When this was pointed to ld. Senior DR, he stated that the assessee has earned exempt income and the disallowance suo-motto made by him of Rs. 11,69,655/- is not accurate with the provisions of the Act and hence, the AO has rightly invoked the provisions of section 14A r.w. rule 8D of the Rules but he has not objected in setting aside the issue to the file of the AO for verification purpose to verify the availability of funds and also the computation made under Rule 8D(2)(iii) of the Rules. The ld. counsel also filed copy of Tribunal order in assessee's own case in earlier assessment year 2015-16 in ITA No. 2824/CH....

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....ax Rules, 1962. This proposition is supported by the decision of Hon'ble Delhi High Court in the case of M/s. ACB India Ltd. Vs ACIT, reported in 374 ITR 108. This proposition is further supported by the decision of ITAT., Delhi Special Bench in the case of ACIT Vs. Vireet Investments Pvt. Ltd., reported in 165 ITD 27. Therefore, we are of the considered view that issue needs to be reconsidered by the Assessing Officer in light of averments made by the assessee that it has sufficient own funds to cover investments made in shares and securities and further, the Assessing Officer has considered total investments including investments which does not yield exempt income to compute average value of investments to determine disallowances under Ru....