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2018 (12) TMI 1883 - ITAT CHANDIGARHAddition u/s 14A r.w.r. 8D - disallowance of expenses incurred in relation to earning exempt income - recording of satisfaction - HELD THAT:- As per assessee since no cogent reasons had been recorded by the Assessing Officer for rejecting the correctness of the claim of expenditure as computed by the assessee for the purpose of making disallowance under section 14A the disallowance could not have been made, we do not find any merit in this contention. As per order of the AO and on perusing the same we find that the Assessing Officer had recorded due satisfaction with regard to the incorrectness of claim of disallowable expenses made by the assessee, before proceeding to work out the disallowance as per Rule 8D himself. We find that the Assessing Officer had recorded his satisfaction. Assessing Officer was not satisfied with the correctness of the amount worked out by the Assessee since he had noted therein that the assessee had not apportioned expenditure of the nature of rent, taxes, salary etc. while working out his estimate of the expenditure to be apportionment u/s 14A - Assessee has been unable to controvert this contention of the Assessing Officer. In view of the above, there is no doubt about the fact that the assessing officer had duly recorded why he found the disallowance made by the assessee incorrect. The act of the Assessing Officer in applying Rule 8D for the purpose of working out the disallowance under section 14A we hold has been rightly upheld by the Ld. CIT(A),as being in accordance with law. The contention raised by the Ld. Counsel for the Assessee in this regard is therefore dismissed. Alternate contention of the assessee that the disallowance calculated as per Rule 8D(2)(iii) was to be restricted to those investments only on which exempt income had been earned is acceptable. We find that both the Special Bench of the ITAT in the case of Vireet Investments [2017 (6) TMI 1124 - ITAT DELHI] and ACB India Ltd. [2015 (4) TMI 224 - DELHI HIGH COURT] have laid down the preposition that for the purpose of calculating the disallowance u/s 14A read with Rule 8D, only those investments which have earned exempt income have to be considered. Thus we hold that the disallowance under section 14A Read with Rule 8D(2)(iii) is to be calculated by taking into consideration only those investment which have earned exempt income during the year. The Assessing Officer is directed therefore to recompute the disallowance in accordance with aforesaid proposition laid down by the Courts. - Decided partly in favour of assessee. Disallowance of interest expenses u/s 36(1)(iii) - sole contention raised by Assessee was that since it had enough own funds available no disallowance under section 36(1)(iii) was warranted - HELD THAT:- Various courts have held that no disallowance u/s 36(1)(iii) is warranted where availability of sufficient own interest free funds is demonstrated by the assessee. The Ld. DR has failed to point out any contrary decision either of the jurisdictional High Court or the Apex Court. Therefore there remains no dispute with regard to the said proposition of law. Further the audited financial statements of the assessee show sufficient own funds in the form of share capital and reserves to the tune of ₹ 144 Cr. ,while the amount invested in building in relation to which the impugned disallowance has been worked out is RS.52,46,711/-The Ld. Dr has not controverted the said facts before us. Therefore ,in the light of the fact that sufficient own funds were available with the assessee,no disallowance u/s 36(1) (iii) was warranted in the present case. We therefore set aside the order of the Ld.CIT(A) in this regard. - Decided in favour of assessee.
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