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2015 (10) TMI 393 - AT - Income TaxDisallowance of expenses incurred in earning tax-free income invoking provisions of section 14A - Held that:- For the purpose of deciding the disallowance under section 14A r.w. Rule 8D(2)(ii), those details will be very material. We are of the view that if the stand taken by the assessee on the disallowance of interest expenses under Rule 8D(2)(ii) of the Rules is factually correct, then no disallowance of interest expenses can be made. We, however, find that the required details have not been filed by the assessee before us. In such circumstances, we are of the view that it would be just and fair to set aside the order of the CIT(Appeals) on this issue and remand the question of disallowance of interest expenses under Rule 8D(2)(ii) to the Assessing Officer for fresh consideration with a direction to the assessee to furnish the required details to substantiate its claim as made before the CIT(Appeals). As far as disallowance under Rule 8D(2)(iii) is concerned, the assessee has not shown as to what is the expenditure to be disallowed. The assessee’s only plea before the CIT(A) was that weighted average based on time (no. of days) in which investments were made should be considered. As rightly contended by the ld. DR, the above stand of the assessee cannot be sustained in view of the clear mandate of Rule 8D(2)(iii) of the Rules, which refers to only the average value of investments as appearing in the Balance Sheet of the assessee as on the first and last day of the previous year. One cannot travel beyond the language of Rule 8D(2)(iii) of the Rules. In the absence of any other plea by the assessee in this regard, the disallowance has to be sustained. However, we find that the Hon’ble Delhi High Court in Joint Investments Pvt. Ltd. (2015 (3) TMI 155 - DELHI HIGH COURT ) has held that disallowance u/s. 14A of the Act cannot be in excess of the tax exempt income. Following the aforesaid decision, we direct the AO to restrict the disallowance to income that is exempt in the set aside proceedings under Rule 8D(2)(iii) of the Rules, after complying with the directions with regard to disallowance of interest expenses under Rule 8D(2)(ii) of the Rules. - Decided partly in favour of assessee for statistical purposes.
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