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2021 (3) TMI 653 - AT - Income TaxDisallowance u/s 14A r.w Rule 8D(2)(ii) - HELD THAT:- When the disallowance under Sec. 14A r.w Rule 8D(2)(iii), as claimed by the assessee, is found to be lower than the amount of the exempt income that was received by it during the year in question, the disallowance under the aforesaid statutory provision was liable to be restricted only to the extent the same was computed under Sec. 14A r.w Rule 8D(2)(iii). In our considered view, the intent of the first appellate authority to restrict the disallowance under Sec.14A to the extent the same is worked out u/rule 8D(2)(iii), subject to an upper limit i.e the amount of the exempt dividend income that was earned by the assessee during the year in question can safely be gathered from a conjoint perusal of his observations recorded in the appellate order. Be that as it may, in order to dispel any doubts, we herein direct the A.O to restrict the disallowance under Sec. 14A r.w Rule 8D to the extent the same is worked out u/rule 8D(2)(iii) i.e after excluding the investments that had not yielded any exempt income during the year in question, as directed by the CIT(A), subject to an upper limit as that of the exempt dividend income that was earned by the assessee during the year in question. Disallowance computed under Sec. 14A r.w Rule 8D to be added to the ‘book profit’ under Sec. 115JB - HELD THAT:- As observed by the CIT(A), the ‘Special bench’ of the ITAT Dehli in the case of ACIT & Anr. Vs. Vireet Investments Pvt. Limited & Anr [2017 (6) TMI 1124 - ITAT DELHI] had clearly observed that for the purpose of computing the ‘average value of investments’ within the meaning of Rule 8D(2)(iii) the investments which had not yielded any exempt income during the year are liable to be excluded. Also, the ‘Special bench’ of the Tribunal had observed, that computation under clause (f) of ‘Explanation 1’ to Sec.115JB(2) is to be made without resorting to the computation contemplated under Sec. 14A r.w Rule 8D of the Income Tax Rules,1962. Accordingly, finding no infirmity in the view taken by the CIT(A) w.r.t the aforesaid two issues on the basis of which his order has been assailed by the revenue before us, we, thus uphold the same.
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