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2019 (1) TMI 1796 - AT - Income TaxDisallowance u/s 14A - computing the average value of investment for the purpose of disallowance u/s 14A which are incapable of yielding tax free income - HELD THAT:- AO cannot adopt the average value of the total investment instead of the average value of investment of which income is not part of a total income i.e. value of tax exempt investment. In view of this binding precedent, we find that the AO had to consider only those investments which have actually yielded the tax exempt income during the relevant year and not the total investment. On the aspect of the contention of the assessee that the disallowance should be restricted to some reasonable proportion of actual dividend received and such disallowance cannot in any case, exceed exempt dividend income earned during the relevant year , this proposition is based on the decision Joint Investments P. Ltd. vs CIT [2015 (3) TMI 155 - DELHI HIGH COURT] as holds the field and while respectfully following the same, we find that the disallowance shall not exceed the exempt income. Set aside the issue and remand the matter to the file of the learned AO to work out the disallowance by calculating the average investment under Rule 8D(2)(ii)/(iii) by taking only those investments which have actually yielded the dividend income during the relevant year and if it exceeds the exempt income, then restrict the same to the extent of exempt income only. Ground Nos. 1 and Additional Grounds are allowed for statistical purposes. Disallowance of prior period expense - according to the assessee, this payment was audit fee payable to statutory auditor, namely Price Waterhouse Cooper and the expenses are pertaining to the year under consideration only on which the assessee had duly deducted the tax at source - CIT(A) found that there is inherent contradiction in the stand taken by the assessee inasmuch as according to him, there was payment of TDS on the payments made to the auditor and disallowance u/s 40( a) (ia) while computing the taxable income - HELD THAT:- No reason to interfere with the findings of learned CIT(A) and it is not substantiated before us as to how the findings of the learned CIT(A) are incorrect. We, therefore, uphold the findings of the learned CIT(A). Short credit of TDS - CIT(A) recorded that the assessee submitted an application for rectification and it was still pending - HELD THAT:- Learned CIT(A) directed the AO to allow the claim after proper verification. Claim of the brought forward loss and depreciation - CIT(A) directed the learned AO to allow the same after proper verification - HELD THAT:- We do not find anything illegal or irregular in these directions of the learned CIT(A).
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