TMI Blog2018 (12) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... der Rule 8D(2)(iii) by considering the investments in shares, irrespective of whether such investment had yielded any exempt income during the relevant period, is set aside. The matter is restored to the file of the A.O with a direction to re-work the disallowance under Sec. 14A r.w Rule 8D(2)(iii) in terms of our aforesaid observations. - ITA No. 3169/Mum/2016 - - - Dated:- 30-11-2018 - Shri G.S. Pannu, Vice President and Shri Ravish Sood, Judicial Member For The Appellant : Shri Nirav Vora, A.R For The Respondent : Shri Nilu Jaggi, D.R ORDER Per Ravish Sood, JM The present appeal filed by the assessee is directed against the order passed by the CIT(A)-53, Mumbai, dated 26.11.2015, which in turn arises from the order passed by the A.O under Sec.143(3) of the Income Tax Act, 1961 (for short Act ), dated 31.12.2012. The assessee assailing the order of the CIT(A) has raised before us the following grounds of appeal : 1. The Hon ble Commissioner of Income Tax, Appeal -(53), Mumbai has erred in law and in facts in assessing the income at ₹ 59,65,850/- as against the returned loss of ₹ 35,93,90,734/- resulting in net addition/ dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oticed by the CIT(A) that the assessee during the year had substantial investments of ₹ 323.70 crores as on 31.03.2010 in shares of its group and other companies. On a perusal of the records, it was observed by the CIT(A) that the assessee was not maintaining any separate accounts as regards its exempt income. The CIT(A) observed that the assessee had voluntarily made a disallowance of administrative expenses of ₹ 37,27,246/- under Sec. 14A r.w Rule 8D(2)(iii) by considering only the investments in Housing Development and Infrastructure Ltd. (for short HDIL ) and Dewan Housing Limited (for short DHFL ) which had yielded exempt income during the year under consideration. However, the CIT(A) was not persuaded to subscribe to the aforesaid disallowance so offered by the assessee under Sec. 14A r.w. Rule 8D(2)(iii). The CIT(A) was of the view that as per the provisions of Rule 8D(2)(iii) an amount equal to 0.5% of the average of the value of investments, income from which does not or shall not form part of the total income, as appearing in the balance sheet, of the assessee on the first day and the last day of the previous year was to be treated as the expenditure in rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee at the very outset of the hearing of the appeal submitted that the present appeal involves a delay of 48 days. It was submitted by the ld. A.R that the assessee company had received the order of the CIT(A)- 53, Mumbai, on 18.01.2016, and the same was delivered to its auditors viz. M/s Thar Company, Chartered accountants for filing of an appeal with the Tribunal. It was averred by the ld. A.R that though the chartered accountant had assured that the appeal would be filed within the stipulated time period, however as he remained engrossed in the time barring assessments at the relevant point of time, therefore, the filing of the appeal inadvertently remained omitted to be done within the stipulated time period and could only be filed on 04.05.2016. The ld. A.R in order to substantiate the aforesaid reason leading to delay in filing of the appeal by the assessee took us through the affidavit of Shri. B.S. Sharma, Director of the assessee company, wherein the aforesaid facts leading to delay in filing of the appeal were deposed by him. It was submitted by the ld. A.R that as the delay in filing of the appeal had occasioned on account of failure on the part of the Chartere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... courts to do substantial justice to parties by disposing off matters on merits. It is further observed by the Hon ble Apex Court that the sufficient cause for condonation of delay involved in filing of the appeal should be interpreted with a view to do even-handed justice on merits in preference to an approach which scuttles a decision on merits. We thus in the backdrop of the aforesaid facts and the settled position of law, are of the considered view that the delay of 48 days in filing of the present appeal deserves to be condoned. In terms of our aforesaid observations we condone the delay of 48 days involved in filing of the appeal by the assessee. 7. We shall now advert to the merits of the case. In the present appeal the assessee has sought our indulgence to adjudicate as to whether the CIT(A) is right in law and facts of the case in sustaining the disallowance of ₹ 1,39,89,537/- made by the A.O under Sec. 14A r.w. Rule 8D. The ld. A.R at the very outset of the hearing of the appeal submitted, that the lower authorities while computing the disallowance of the expenditure incurred for earning of the exempt dividend income under Sec.14A r.w Rule 8D(2)(iii), had erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Cheminvest Ltd. Vs. CIT-IV (2015) 61 taxmann.com 118 (Delhi). The ld. A.R taking support of the aforesaid judicial pronouncement submitted, that now when the very sine qua non for working out the disallowance under Sec.14A was earning of exempt income by the assessee, therefore, it could safely be concluded that for the purpose of computing the disallowance as per Rule 8D(2)(iii) only the average of exempt income yielding investments could only be considered. On the basis of his aforesaid contention it was submitted by the ld. A.R that the disallowance under Sec. 14A r.w. Rule 8D(2)(iii) may be restricted only in respect of the investments from which exempt dividend income was either received or receivable by the assessee during the year under consideration. It was further averred by the ld. A.R that the disallowance under Sec.14A was not to be considered for working out the book profit under Sec.115JB. 8. Per contra, the ld. Departmental Representative (for short D.R ) relied on the orders of the lower authorities. It was submitted by the ld. D.R that no infirmity did emerge from the order of the A.O who had rightly computed the disallowance under Sec. 14A r.w. rule 8D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or working out the disallowance under Rule 8D(2)(iii) is also fortified by the order of the ITAT Kolkata, Bench A in DCIT, Circle-1, Kolkata Vs. Teenlok Advisory Services (Pvt. Ltd.) (2016) 71 Taxmann.com 269 (Kolkata). The Tribunal in its aforesaid order had observed that disallowance under Rule 8D with respect to income not includible in total income has to be computed by taking into consideration only those shares which has yielded dividend income in the year under consideration. Further, a similar view was also taken by the ITAT, Kolkata Bench A in REI Agro Limited Vs. DCIT, Central Circle XXVII, Kolkata (2013) 35 Taxman.com 494 (Kol). It was observed by the Tribunal that the disallowance under Rule 8D with respect to income not includible in total income cannot be computed by taking into consideration entire value of investments made by the assessee. Still further, a similar view had also been taken by the ITAT, Delhi Bench H (Special Bench) in the case of ACIT, Circle 17(1), New Delhi Vs. Vireet Investment (P) Ltd. (2017) 82 taxman.com 415 (Del)(SB). In the aforementioned case, it was observed by the Tribunal that only those investments are to be considered for computi ..... 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