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2020 (11) TMI 371 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - as per assessee he not made any investment for earning of the interest income from its H.O - HELD THAT:- We find ourselves to be in agreement with the claim of the ld. A.R that the disallowance under Sec. 14A r.w Rule 8D(2)(ii) as regards the interest expenditure has to be carried out after netting of the interest paid by the assessee on borrowings and the taxable interest income earned during the year under consideration. Accordingly, we direct the A.O to recompute the disallowance under Sec. 14A r.w Rule 8D(2)(ii) in terms of our aforesaid observations. Somewhat similar claim was raised by the assessee in its appeal before the Tribunal for A.Y. 2011-12, which, however, was rejected by the Tribunal. In its case for the aforementioned preceding years, it was the claim of the assessee that the disallowance of administrative expenses under Rule 8D(2)(iii) may be restricted to the extent of 1% to 2% of its exempt income. However, the Tribunal taking cognizance of the fact that from A.Y. 2008-09 onwards disallowance under Sec. 14A was to be computed in accordance with Rule 8D, had thus, rejected the aforesaid claim of the assessee. In our considered view as there is no substance in the claim of the assessee that de hors any investment made for earning of the interest income from its H.O no disallowance was called for under Sec. 14A r.w. Rule 8D(2)(iii), we decline to accept the same. Deduction u/s 44C - attributing part of the head office expenses incurred by an assessee, a non-resident, to the business of the assessee in India - HELD THAT:- Legislature in all its wisdom had provided a basis for attributing a part of the head office expenses incurred by an assessee, a non-resident, to the business of the assessee in India. For purpose for making available of the aforesaid statutory provision i.e Sec. 44C on the statute, we find, that the same was backed by the reason that it was extremely difficult to scrutinise and verify the veracity of the claims of the non-resident assessee‟s carrying on any business or profession in India, as regards their head office expenses attributable to such business or profession in India - unable to concur with the view taken by the lower authorities that the absence of the head office expenses attributable to its business in India, in the audit report or the notes to accounts of the Indian branch would therein render it ineligible to claim the deduction under Sec. 44C - Assessee had rightly claimed deduction of 5% of the “adjusted total income”, as the same is lower than the amount of the head office expenditure incurred by the assessee as is attributable to its business in India - No favour with the view taken by the lower authorities, therein “set aside‟ the order of the CIT(A) and direct the A.O to allow the assessee‟s claim for deduction under Sec. 44C Disallowance u/s 14A - A.Y. 2010-11 - Whether no exempt income has been earned or received by the Assessee? - HELD THAT:- Amount of the disallowance under Sec. 14A is liable to be restricted to the extent of the exempt interest income. Our aforesaid view is fortified by the judgments of the Hon’ble High Court of Delhi in the case of JCIT Vs. Joint Investments Pvt.ltd. (2015 (3) TMI 155 - DELHI HIGH COURT and Cheminvest Ld. Vs. CIT [2015 (9) TMI 238 - DELHI HIGH COURT] - Accordingly, in terms of our aforesaid observations, the A.O is directed to restrict the disallowance under Sec.14A to the extent of the amount of the exempt income of the assessee for the year under consideration.
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