2021 (7) TMI 1486

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.... manufacturing and trading of petro chemical products filed its return of income for assessment year 2015-16 on 30.11.2015 by declaring total income of Rs. 97,97,73,029/-. The assessment has been completed u/s. 143(3) of the Income Tax Act, 1961 on 28.12.2017 determining total income at Rs. 100,62,81,904/- by making disallowance of expenditure in relation to exempt income u/s. 14A r.w. Rule 8D for Rs. 28,51,669/-, disallowance of subsidy for HCFC phase out for Rs. 2,32,50,000/- and further disallowance of rent equalization charges at Rs. 4,07,206/-. The assessee carried the matter in appeal before first appellate authority and the learned CIT(A), for the reasons recorded in his appellate order dated 24.07.2019 has p....

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....e for relevant year needs to be considered, whereas the Assessing Officer has taken total investments including investments which do not yield any exempt income. Therefore, matter may be set aside to file of the Assessing Officer for verification of availability of own funds and category of investments which yield exempt income. 4. The learned DR, on the other hand, strongly supporting order of the learned CIT (A) submitted that disallowance of expenses contemplated under section 14A should be computed by invoking prescribed procedure provided under Rule 8D, as per which once there is exempt income, then the Assessing Officer shall compute disallowance without resorting into whether the assessee has invested own funds or borrowed funds a....

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....ces under Rule 8D(2)(iii) of Income Tax 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 investme....