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2023 (8) TMI 921 - AT - Income TaxDisallowance u/s 14A read with Rule 8D - assessee did not make any suo-moto disallowance under section 14A read with Rule 8D during the year for earning the dividend income - HELD THAT:- From the financial statement of the assessee, we find that the assessee has debited administrative expenses which includes remuneration to the directors. Accordingly, on the basis of aforesaid facts, AO came to the conclusion that the decision of investment is taken by the directors, so there is nexus of these remuneration expenses with the earning of exempt income since for management of earning exempt income, administration cost is needed. Therefore, it is evident that since after having regard to the accounts of the assessee, AO was not satisfied with the claim of the assessee, disallowance under section 14A read with Rule 8D was computed. We find the action of the AO in computing the disallowance under section 14A read with Rule 8D to be in conformity with the law laid down by Godrej & Boyce Manufacturing Company Ltd [2017 (5) TMI 403 - SUPREME COURT] Also undisputed that the AO has not computed any disallowance under Rule 8D(2)(i) and Rule 8D(2)(ii) of the Rules and only under Rule 8D(2)(iii) of the Rules expenditure in relation to income which does not form part of the total income was computed in the present case. It is pertinent to note that Rule 8D(2)(iii) of the Rules provides a computation mechanism whereby 0.5% of the average of the value of investment, income from which does not form part of the total income, as appearing in the balance sheet on the first and last day of the previous year is considered as the expenditure for the purpose of section 14A Therefore, no infirmity in the impugned order upholding the disallowance under section 14A read with Rule 8D(2)(iii). Accordingly, the impugned order is upheld and the grounds raised by the assessee are dismissed.Decided Disallowance of long-term capital loss and carry forward of same - HELD THAT:- We find that the investment in Prestige Multi Trade Pvt. Ltd. was continuing from the previous financial year and there is no material available on record to show that the same was disputed by the Revenue. Therefore,we deem it appropriate to grant one more opportunity to the assessee in the interest of justice to produce the material, as required by the lower authorities, to substantiate its claim of long-term capital loss on the sale of investment in Prestige Multi Trade Private Ltd. Accordingly, we restore this issue to the file of the AO for de novo adjudication. Further, the assessee is directed to furnish the documents in support of its aforesaid claim. No order shall be passed without affording reasonable opportunity of being heard to the assessee. Ground raised in assessee’s appeal is allowed for statistical purposes. Disallowance of bad debts u/s 36(2) - HELD THAT:- The assessee has also furnished a copy of the ledger of Spanco Telesystems and Solutions Ltd. in its books to show the receipt of payment from the aforesaid entity and sundry balance - It is evident from the record that these details were not furnished before the lower authorities. Accordingly, we deem it appropriate to restore this issue to the file of the AO for de novo adjudication after examining the details as furnished by the assessee. Since the sundry balances written off were disallowed u/s 36(2)(i) the assessee is directed to furnish further details that the said amount was offered as income in previous years. Grounds raised by the assessee are allowed for statistical purposes.
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