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2018 (1) TMI 600 - AT - Income TaxDisallowance made u/s 14A r.w.r. 8D(2)(ii) and Rule 8D (2) (iii) - Held that:- Under sub-clause (iii), what is disallowed is ˝ percentage of the numerator B in rule 8D(2)(ii). Again this is to be calculated in the same line as mentioned earlier in respect of Numerator B in rule 8D(2)(ii). Therefore, not all investments become the subject-matter of consideration when computing disallowance u/s 14A r.w.r 8D. The disallowance u/s 14A r.w.r. 8D is to be in consideration to the income which does not form part of the total income and this can be done only by taking into consideration the investment which has given rise to this income which does not form part of the total income. So far the disallowance under Rule 8D(2)(ii) is considered, the assessee company has proved that it has sufficient funds to invest in shares and securities, therefore, no disallowance is warranted. Therefore, we are of the view that disallowance u/s 14A r.w.r. 8D(2)(ii) should not be made in the case of the assessee under consideration because the assessee had its own funds to invest in shares and securities and some of the investments were made by the assessee in subsidiary companies for strategies purpose. Hence, we confirm the order passed by the ld CIT(A), so far the disallowance under Rule 8D (2) (ii) is concerned. For disallowance under Rule 8D(2)(iii), the assessee had suo-moto disallowed ₹ 1,05,100/-, however, we note that in order to compute the disallowance under Rule 8D (2) (iii), only dividend bearing securities should be considered. Therefore, we direct the AO to compute disallowance after taking consideration the investment which was given rise to the exempt income, that is, dividend bearing shares and securities, as per the method suggested in the judgment of REI Agro ltd. vs. DCIT reported in [2013 (9) TMI 156 - ITAT KOLKATA] and the disallowance so computed should be reduced by ₹ 1,05,100/-, the suo moto amount disallowed by the assessee. - Decided partly in favour of revenue
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